r'-l. 


LifcJKAKY 

UNIVERSITY  OF 
CALIfOKNIA 

.     SAN  DIEGO     . 


\ 


FROM 

THE   BUSINESS 

HISTORICAL 

SOCIETY,  Inc. 


IN  MEMORY  OF 

CHARLES  A.  MOORE 


FOUNDER  AND  FIRST  PRESIDENT  OF  MANNING, 

M,\XWELL  &  MOORE,  INC. 

GIFT  OF 

MARY  CAMPBELL  MOORE 

CHARLES  A.  MOORE,  JR. 

EUGENE  M.  MOORE 


3  1822  01129  6845 


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UNSEEN   EMPIRE    ■ 


A  stusd^  of  th^<B  plsgl^t  of 

By 
DAVID    STARR    JORDAN 

President  of  Stanford  University 


God  is  not  sinless;   he  created   borrowers 

Bulgarian  Proverb 


^ 

1     IN-LUCE- 
|VER1TATIS 

^^m^ 

|iiiiiiiiiiuiMiiiiiiiiiiniiunii»iiiuniiiiumiiiiimiiiiniiniiriijnimniiniiiaiminiiniiiniiniii>iuaiiiiniiiiiiiiiiiuiuiiiiiiiniunuiiiitnniiuiinim 

Boston 

American    Unitarian  Association 

1912 


ix^Y:  ^^,  ''^.i  7 


^ita 


Copyright,  1912 
American  Unitarian  Association 


v3v 


TO 
EDWIN  GINN 


ojfT  or 


PREFATORY  NOTE 

Some  years  since,  I  began  a  study  of  the 
Eugenics  of  War,  the  hereditary  effects  of  the 
systematic  extermination  by  war  of  the  bold  and 
strong  among  the  yeomanry  of  the  nations  of 
Europe.  The  first  results  of  this  study  I  set 
forth  in  two  little  books,  "The  Blood  of  the  Na- 
tion" and  "The  Human  Harvest."  I  soon  found 
it  necessary  to  consider  also  the  "Euthenics"  of 
War,  the  non-hereditary  effects  of  the  financial 
impoverishment  of  the  rank  and  file  of  the  people 
by  the  cost  of  war  and  war  armament.  This 
little  book  is  a  preliminary  survey  of  the  elements 
involved  in  this  subject.  There  is  a  Persian  prov- 
erb, "He  who  knows  will  never  tell."  In  this 
lies  my  justification  for  venturing  into  a  field  in 
which  first-hand  knowledge  is  largely  out  of  my 
reach.  I  am  indebted  to  Mr.  E.  Alexander 
Powell  for  the  phrase,  "The  Unseen  Empire."  I 
am  also  under  obligations  to  my  colleagues.  Pro- 
fessors Edward  Bonjamin  Krchbicl,  Alvin  Saun- 
ders Johnson,  Payson  Jackson  Treat  and  Albert 
Leon  Guerard  for  suggestions  of  various  kinds. 
I  am  also  indebted  to  ^Ir.  Arthur  W.  Allen  of 
the  World  Peace  Foundation  for  the  tables  in  the 
appendix,  showing  the  record  of  debt  and  ex- 
penditure.    Lastly,  I  am  under  deep  obligations 


PREFATORY  NOTE 


to  my  wife,  Jessie  Knight  Jordan,  for  construct- 
ive and  critical  work  on  the  manuscript. 

David  Staee  Jordan 
Stanford  University, 
California. 


CONTENTS 


PAGE 

I.     INTRODUCTION 1 

II.     THE  UNSEEN  EMPIRE  OF  FINANCE     ,  4 

A   Phegj^ant  Epoch 4 

Constitutional    Government    and    Deferred 

Payment       5 

National    Debt 6 

Science     and     War 7 

The  Farmer  and  His  Burden 8 

"The    Peace   of  Dmes" 8 

The  House  of  Rothschild 9 

Banking    and     "Pawnbroking"      ....  13 

The  Unseen  Empire  of  Finance     ....  14 

The    Gratitude    of    Nations 20 

"Money  Power" 22 

III.  THE  UNSEEN  EMPIRE  OF  DEBT     ...  25 

War   Debt   and   Other  Debt 25 

Debt  of  Great  Britain 27 

Debt  of  France 32 

Debt    of    Germany 37 

Debt  of  the   United  States 41 

Debt  of  the   Lesser   Nations 45 

Relative   Cost  of   War 47 

Trusts    versus    War    Debt 50 

The    Spendthrift    Age 51 

The    Burden    of    Armament 53 

War   Expenditure   and  National   Resources  54 

War  Debt  as  a  Blessing 56 

The  Cost  of  Living 59 

IV.  THE    CONTROL    OF    NATIONS     ....  62 

"Dollar  Diplomacy" 62 

"Spheres  of   Influence;"    (Persia)      ...  63 

"Continuity  of  Foreign  Policy"     ....  68 


CONTENTS 

PAGE 

Money  and  the  Morocco  Affaib     ....  69 

Money  and  the  Tripoli  Affair     .     ...  12 

Cost  of  a  Small  Modern  War 73 

Cost  of  Armageddon 74 

Interest  of  "High  Finance" 80 

War    and   Modern    Banking 83 

V.     SEA    POWER 86 

Ahmajient  Competition 86 

Purposes  of  Sea  Power 87 

Abolition    of   Legalized    Piracy     ....  93 

Keeping  Step 94 

The   Monroe   Doctrine 96 

Unwillingness   to   Pay 97 

Sea  Power  and  Po\'erty 99 

VI.     "SYNDICATES    FOR    WAR" 102 

The    British    Ship    Lobby 102 

Militarism  Further  Entrenched  .  .  .  106 
Activities  of  Armament  Syndicates  .  .  .  107 
The   "War  Scare"  as  a  Weapon     .      .      .      .111 

Armament  for  War  or  Peace 124 

The    "Peace   Establishment" 125 

"Peace     Establishments"     and     Secret     Di- 
plomacy          126 

Economic    Difficulties    in    Disarmament     .  127 

VII.     WAR  TO-DAY 130 

Types  of  Modern  War 130 

"The    Great    Illusion" 132 

The  "Mirage  of  the  Map" 134 

The  Hidden  Trail  of  Diplomacy     ....   136 

"Powers"     or     Jurisdictions? 140 

Germany  a  Case  in  Point 141 

EngliVnd  and   Germany   as   Rival  "Powers"  143 

Why    Talk    of    War? 144 

Professional  Interest  a  Factor  ....  146 
A    Grotesque    of    History 148 


CONTENTS 

PAGE 

VIII.    RETRENCHMENT 131 

Functions  of  Goveenjient 151 

Expenses  Unchecked         152 

The    United   States   and   Retrenchment     .  155 

A    Way    to    Retrench 167 

Readjustment    of    Values 169 

Chief   Business   of  Government     ....   172 

IX.    THE  PASSING  OF  WAR 175 

The  Future  of  War 175 

A    Way    Out 177 

The  Passing  of  War 179 

APPENDIX— Tables  of  Debt  and  Expenditure     .      .   185 
A     The  Interest-Bearing  Debts  of  the  Principal 

Nations 186 

B     The  World's  Military  Expenditure     .      .      .   188 
C    Expenditures    of    the    Ten    Chief    Military 

Nations 190 

D     Cost  of  Army  per  Unit  of  Fighting  Force     .   191 
E     Cost  of   Army   and   Navy   per   Unit  of   Pop- 
ulation       191 

F     Proportion    of    Military    Charges    to    Total 

Expenditures    in    Ten    Nations      .      .      .192 
G     Growth  of  Expenditures  for  Army,  1881-1911  192 
H     Growth  of  Expenditures  for  Navy,  1881-1911  193 
I     Growth  of  Combined  Expenditures  for  Army 

and  Navy 194' 

J     The  Growth  of  Debt 194 

K     Growth    of    Interest    Charge 195 

L    Combined  Cost  of  Army  and    Navy  with  In- 
terest Charges  During  30  Years     .      .      .   195 
M     Appropriations     and     Expenditures     of     the 

United  States 196 

N     Expenditures  of  the   Public   Money  in   the 

United  States 197 

O     Public  Debt  of  Great  Britain 198 

P    Public  Debt  of   France 199 

INDEX 201 


UNSEEN  EMPIRE 

I.     INTRODUCTION 

In  this  book  I  have  tried  to  tell  in  part  the 
story  of  the  bondage  of  the  nations  due  to  the 
cost  of  war  and  of  war  preparation.  I  have 
tried  to  show  that  civilized  nations  are  one  and 
all  in  their  degree  under  the  dominion  of  a  power 
stronger  than  Kings  or  Parliaments,  more  last- 
ing than  Armies  or  Navies,  that  is,  the  Unseen 
Empire  of  Finance.  I  have  tried  to  show  that 
this  mastery  is  not  now  in  the  hands  of  individual 
men,  however  powerful,  but  that  it  has  passed 
over  into  an  impersonal  Empire  of  Debt.  I  have 
tried  further  to  illustrate  "Johnson's  law  of 
waste,"  ^  to  the  effect  that  militar}^  expenditures 
among  competitive  nations  expand  in  peace  or  in 
war  as  wealth  expands,  "by  the  law  that  war  shall 
consume  the  fruits  of  progress,"  and,  finally,  to 
show  a  way  in  which  our  nation,  at  least,  may 
possibly  escape  the  operation  of  this  law. 

I  have  ventured  to  believe  that  Johnson's  law 
is  dependent  on  a  lack  of  continuous  purpose  in 
popular  governments,  and  that  conditions  may  be 
changed  by  the  growth  of  a  robust  public  opin- 
ion opposed  to  war  and  debt,  and  by  the  extension 
of  treaties  of  arbitration,  which,  while  dependent 
on  public  opinion,  yet  serve  to  clinch  and  hold  it  in 
right    channels.     However    great    the    burden    of 

1  Professor    Alvin    S.    Johnson,    The    Expansion    of    Mil- 
itary Expenditures.     International  Conciliation,  XLI,  p.  9. 


UNSEEN  EMPIRE 


debt,  it  is  in  our  hands  to  shift  it.  As  Sir  Edward 
Grey  has  said  in  this  connection :  "The  door  of  our 
prison  is  locked  on  the  inside."  The  way  out  lies 
in  the  unprejudiced  survey  of  the  whole  situation 
on  the  part  of  a  civilian  commission  of  high 
minded  statesmen  who  will  ascertain  the  real 
needs  of  the  people  in  the  line  of  national  defense, 
regardless  of  pressure  arising  from  personal  in- 
terests, from  professional  ideals  of  military  per- 
fection and  from  the  tendency  to  follow  blindly 
the  fashion  set  by  the  "Powers"  of  Europe. 
There  is  no  final  peace  until  the  civilized  nations 
cease  to  stand  as  "Powers"  rated  according  to 
their  capacity  to  exercise  external  violence,  be- 
coming "States"  in  the  moral  union  of  the  world, 
each  one,  large  or  small,  being  primarily  a  dis- 
trict of  legal  and  political  jurisdiction,  not  a 
center  of  physical  force.  And  at  the  end  I  have 
hoped  to  make  it  clear  that  war  debt,  the  over- 
lordship  of  the  Unseen  Empire,  the  "war  scare," 
and  secret  diplomacy  are  all  of  them  necessary 
stages  in  the  passing  of  war. 

In  this  book  there  is  no  discussion  of  the  ex- 
istence or  the  effects  of  the  "money-trusts,"  in- 
ternational or  otherwise,  nor  is  there  any  account 
of  the  various  associations,  national  or  interna- 
tional, for  purposes  of  industrial  exploitation. 
The  relation  of  financial  matters  to  war  armament 
and  national  debt  alone  concerns  us. 

I  wish  to  say  at  the  outset  that  my  thesis  in- 
volves no  criticism  of  the  men  who  compose  our 


INTRODUCTION 


army  or  who  man  our  ships.  I  believe,  however, 
that  the  time  has  come  to  cast  behind  us  the 
thought  of  war  as  a  possibility  in  national  affairs, 
and  to  devote  our  money  and  our  energies  toward 
more  real  and  immediate  needs.  We  have  better 
weapons  than  the  sword,  a  more  powerful  national 
defense  than  warships. 

I  hold  in  the  highest  esteem  the  character  and 
influence  of  our  national  academies  at  West  Point 
and  Annapolis.  These  stand  among  the  best 
schools  of  engineering  in  the  world,  and  none 
excels  them  in  that  discipline  of  self-restraint 
which  is  the  foundation  of  character.  Among  the 
officers  of  our  army  and  navy  are  many  who  do 
most  effective  work  for  peace.  They  recognize 
the  wickedness  and  futility  of  avoidable  war. 
Those  who  know  war  best  realize  that  there  can 
be  no  worse  calamity. 

A  typical  utterance  of  a  brave  man,  a  states- 
man as  well  as  a  soldier,  is  this  of  General  Carl 
Schurz  after  Gettysburg:  "There  are  those  who 
speak  lightly  of  war  as  a  mere  heroic  sport.  They 
would  hardly  find  it  in  their  hearts  to  do  so  had 
they  ever  witnessed  scenes  like  these  and  thought 
of  the  untold  miseries  connected  with  them  that 
were  spread  all  over  the  land.  He  must  be  an 
inhuman  brute  or  a  slave  of  wild  unscrupulous 
ambition  who,  having  seen  the  horrors  of  war,  will 
not  admit  that  war  brought  on  without  the  most 
absolute  necessity  is  the  greatest  and  most  un- 
pardonable of  crimes." 


II.     THE  UNSEEN  EMPIRE  OF  FINANCE 

In  this  chapter  I  try  to  set  forth  briefly  the 
story  of  the  rise  of  the  "pawnbrokers"  of  the 
world,  into  whose  hands  the  commerce  and  in- 
dustry of  the  nations  have  been  given  as  pledges 
for  purposes  of  war. 

It  is  true  that  many  of  these  men  and  the 
houses  they  have  founded  have  become  prominent 
as  bankers  and  as  leaders  in  commercial  and  in- 
dustrial enterprise.  Many  of  them  also  have 
been  eminent  for  personal  virtue  and  as  benefac- 
tors to  their  kind.  Nevertheless,  one  and  all 
have  laid  the  foundations  of  their  fortunes  in 
"pawnbroking,"  that  is,  in  ministering  to  the  de- 
mands of  spendthrift  nations. 

A  Pregnant  Epoch 

One  of  the  most  momentous  periods  in  world- 
history  was  that  of  the  early  nineteenth  century. 
This  epoch  was  marked  by  the  coming  together 
of  growing  forces  in  civilization,  all  related  in 
one  way  or  another  to  the  rise  of  democracy,  itself 
a  cause  as  well  as  an  effect  of  the  passing  of  civil 
war. 

First  of  these  stands  government  by  the 
people,  as  opposed  to  government  by  the  King 
and  the  King's  favorites.  Next  comes  the  move- 
ment of  scientific  research  which  in  turn 
gave    the   impulse   toward   mechanical   invention- 

4 


CONSTITUTIONAL  GOVERNMENT       5 

Invention  changed  the  nature  of  war,  as  it 
changed  industry  and  commerce.  It  made  war 
operations  vastly  more  effective  as  well  as  vastly 
more  expensive.  Finallj^,  we  have  the  rise  of  an 
international  system  of  finance,  strong  enough 
and  with  ramifications  wide  enough  to  take  whole 
nations  into  pawn,  and  always  at  hand  statesmen 
ready  to  pledge  the  future  to  any  extent  in  the 
interest  of  national  glory. 

Constitutional       Government       and       Deferred 
Payment 

Constitutional  Government  gives  stability 
which  makes  possible  deferred  payments  on  a 
vast  scale.  The  Kings  of  Old  had  to  pay  on  the 
spot.  Their  credit  was  bad.  They  were  forced 
to  make  their  way  by  many  devices.  Among 
these  was  extortion,  a  form  of  which  was  the 
"patriotic  loan,"  enforced  with  the  prison  as  the 
alternative.  Otherwise  they  depended  on  fawn- 
ing, bluster,  sale  of  favors,  debasement  of  coin- 
age, issue  of  paper  money,  "squeezing"  of  taxes, 
and  other  methods  characteristic  of  the  absolute 
monarchy.  "L'ctat,  c'est  moi"  "I  am  the  State," 
was  the  declaration  of  Louis  XIV,  and  the  State, 
which  was  the  King,  borrowed  money  at  a  great 
disadvantage.  But  a  Parliament  could  bind  the 
whole  nation.  It  could  borrow  money  it  never 
expected  to  pay.  It  had  only  to  keep  up  the  in- 
terest charges.  Thus  the  debt  of  Republican 
France  today  exceeds  many  times  the  largest  bor- 


UNSEEN  EMPIRE 


rowings  of  Louis  the  Magnificent.  Even  the  in- 
terest charges  alone  approach  the  high  water 
mark  of  the  royal  loans  of  the  Eighteenth  Cen- 
tury. 

National  Debt 

In  the  theory  of  William  Pitt,  premier  of  Eng- 
land, the  source  of  authority  lay  in  the  people. 
The  men  of  England  owned  England  and  were 
responsible  for  its  present  welfare.  "The  only 
source  of  authority  under  Heaven,"  wrote  Crom- 
well, "is  the  consent  of  the  governed."  But  in 
Pitt's  view,  the  owners  of  England  were  the 
people  actually  alive  at  any  given  time.  The 
past  had  no  stake  in  it;  the  future  had  acquired 
no  interest.  Therefore,  if  the  men  of  Great 
Britain  chose  to  mortgage  their  nation  to  secure 
some  great  present  good,  it  was  their  right. 
Thus  immense  sums  were  borrowed  and  expended 
in  compassing  the  downfall  of  Napoleon,  and  the 
national  debt  of  Great  Britain  mounted  up  to 
the  undreamed-of  sum  of  nearly  £800,000,000,  a 
sum  which  has  never  been  repaid,  will  never  be 
repaid,  can  never  be  repaid  so  long  as  the  nat- 
ural growth  in  national  wealth,  due  to  peace, 
invention  and  commerce,  is  all  swallowed  up  by 
the  incredible  burden  of  armament.  With  the  de- 
vice of  the  National  Debt,  as  Goldwin  Smith  ob- 
serves, "Pitt  removed  the  last  check  on  war." 
War  is  no  longer  limited  by  the  exhaustion  of  the 
combatants,  but  may  be  continued  at  the  expense 


SCIENCE  AND  WAR 


of  future  generations  so  long  as  international 
"pawnbrokers"  are  willing  to  cash  the  bills  drawn 
against  the  future. 

It  is  said  that  Pitt's  last  words,  with  the  na- 
tional debt  in  mind,  were  these,  "Oh,  how  I  leave 
my  country." 

Science  and  War 

In  the  nineteenth  century,  mechanical  inven- 
tion, constantly  active,  supplanted  the  wooden 
frigate  of  a  hundred  years  ago  by  Dreadnaughts 
and  Superdreadnaughts,  gigantic  floating  forts, 
each  costing  many  times  an  emperor's  ransom, 
and  each  new  device  tending  to  send  all  vessels 
of  earlier  make  to  the  junkheap.  Twelve  millions 
of  dollars  may  now  be  spent  on  a  single  ship  and 
ever}'-  feature  of  its  upkeep  is  costly  in  the  same 
proportion.  Like  progress  has  been  made  in  the 
art  of  ship-destroying.  Shore  guns,  mines,  tor- 
pedoes now  forbid  the  approach  of  a  warship 
to  a  hostile  port.  Furthermore  all  ships  and  for- 
tresses are  already  threatened  from  the  air.  All 
appliances  of  war  have  steadily  increased  in  ef- 
fectiveness and  in  cost,  in  sad  parallelism  with 
the  applications  of  science  in  other  directions.  As 
the  cost  of  war  expanded,  the  need  for  more  money 
in  all  warlike  nations  grew  likewise.  No  nation 
was  willing  to  be  thought  not  warlike.  Thus, 
more  and  more,  the  statesmen  of  the  day  were 
eager  to  pledge  the  future  of  the  nation  for  im- 
mediate results. 


UNSEEN  EMPIRE 


And  as  all  persistent  demand  is  met  by  supply, 
we  have  as  a  necessary  result  the  rise  of  the 
great  "pawnbroking  houses"  of  the  world,  the  first 
and  most  powerful  of  these  being  the  great  house 
of  Rothschild. 

The  Farmer  and  His  Burden 

In  a  French  Journal  more  than  a  hundred  years 
ago  there  was  published  a  cartoon.  A  farmer  was 
plowing  in  the  field  and  on  his  back  he  bore 
a  frilled  marquis  of  the  old  regime,  tapping  his 
dainty  snufF-box.  A  century  later,  in  Paris, 
was  published  another  cartoon,  representing  again 
the  burden  of  France.  The  farmer  still  plowed  in 
the  field,  but  now,  on  his  back,  was  a  soldier  armed 
to  the  teeth  and  on  the  soldier's  back  was  borne  a 
money-lender. 

"The  Peace  of  Dives" 

In  his  poem,  "The  Peace  of  Dives,"  Rudyard 
Kipling  has  cleverly  told  the  story  of  the  way 
in  which  Dives,  the  Rich  Man,  was  allowed  to 
bring  peace  among  the  nations,  as  a  condition  of 
his  release  from  his  place  in  Torment.  In  brief, 
Dives  came  forth  and  went  abroad  through  the 
earth,  selling  to  the  Kings  and  the  Nations  the 
costliest  of  toys.  He  sold  them  Sea-power  and 
Land-power  and  Imperial  Dominion  and  all  Pomp 
and  Circumstance.  For  these  things,  so  attract- 
ively offered,  the  Kings  and  the  Nations  "pledged 
their  flocks  and  farms"  and  he  bound  them  hand 


HOUSE  OF  ROTHSCHILD 


and  foot  in  the  maze  of  debt,  until  even  the 
mightiest  of  them  were  no  longer  fit  to  fight. 
*'They  had  pawned  their  utmost  trade,  for  the 
dry,  decreeing  blade,"  but  the  blade  once  in  their 
hands,  they  had  no  longer  strength  to  use  it. 
Then  Satan  appears,  but  with  all  his  deadliest 
magic,  greed  and  fear  and  hate,  he  found  it  im- 
possible to  stir  up  the  nations  to  war.  For 
Dives  had  "trapped  them,  armoured  into  Peace." 
So  bound  hand  and  foot  and  peaceful  by  force  of 
debt,  they  were  ready  to  be  laid  at  the  feet  of  the 
Lord. 

The  House  of  Rothschild 

It  is  a  true  story,  that  tale  of  Kipling,  but 
it  is  a  parable  and  thus  needs  a  bit  of  interpreta- 
tion. The  name  of  this  man,  we  may  understand, 
was  not  Dives.  In  the  beginning  it  was  Mayer 
Amschel,  but  as  time  went  on,  his  descendants  con- 
tinued his  work,  and  with  them  were  many  as- 
sociates. He  was  not  a  wicked  man,  as  the  orig- 
inal Dives  was  reputed  to  be,  not  even  a  rich  man 
at  first,  but  sturdy,  honest  and  intelligent.  He 
was  not  in  "Torment."  He  lived  in  a  narrow, 
sharp-gabled  sevcn-stor}'  house  in  the  Ghetto  of 
Frankfort-on-the-Main.  On  the  front  of  this 
house  in  the  old  days  swung  a  pawnbroker's  sign 
of  the  green  shield.  Later  it  was  repainted  and 
in  Mayor's  time  it  was  a  red  shield,  "zum  rothcn 
Schild."  And  as  time  went  on,  all  those  who  lived 
in     the     house     received     the     family     name     of 


10  UNSEEN  EMPIRE 

"Red  Shield,"  in  German,  "Rothschild."  But 
to  Mayer's  family  alone  was  granted  the  control 
of  the  Earth. 

The  story  of  the  rise  of  the  house  of  Roths- 
child is  romantically  interesting,  but  its  details 
need  not  concern  us  here.  Mayer  Rothschild  was 
the  friend  of  William  IX,  Landgrave  of  Hesse 
Cassel  and  through  his  adjustments  the  "Hessian" 
troops  entered  the  British  service  in  the  Revolu- 
tionary War.  This  was  the  first  step  towards 
fortune.  Others  came  later,  for  the  Landgrave's 
gold  and  his  own  were  subsequently  loaned  out 
at  a  profit  to  suppliant  nations.  So  from  being 
a  local  pawnbroker,  Mayer  became  the  "Uncle" 
of  Kings,  and  his  worth  and  power  were  recog- 
nized among  the  financiers  of  Europe.  Nathan 
Rothschild,  his  third  son,  greatest  of  world 
financiers,  extended  his  father's  methods  to  other 
lands.  Establishing  himself  in  London,  he 
placed  his  brothers  in  Frankfort,  Paris,  Naples  and 
Vienna.  It  was  his  assertion  that  while  one  bank 
in  one  capital  might  fail  or  might  be  borne  down 
by  a  national  calamity,  five  banks  in  five  capitals, 
all  working  together,  could  amply  guarantee  one 
another. 

Nathan  Rothschild  was  with  Wellington  at 
Waterloo.  A  system  of  swift  messengers,  horses 
and  carrier  pigeons  bore  secret  news  from  him 
(Nathan)  in  the  field  to  the  bank  in  London,  in 
advance  of  all  other  returns. 

At  once  its  clerks  bought  up  from  scared  bond- 


HOUSE  OF  ROTHSCHILD  11 

holders,  at  a  great  discount,  a  large  part  of  the 
British  National  debt,  which  operation  established 
then  and  there  the  supremacy  of  the  House  of 
Rothschild.^  This  supremacy  it  still  holds  in  so 
far  as  it  may  choose  to  exercise  it. 

According  to  authentic  records,^  the  Roths- 
childs made  a  large  broker's  profit  each  of  the 
four  times  they  handled  the  £80,000,000  of  gold 
which  they  bought  for  use  in  Wellington's  cam- 
paign: 

1.  On  the  sale  of  the  gold  to  Wellington. 

2.  On  the  sale  of  Wellington's  paper. 

1  "That  the  House  of  Rothschild  with  its  branches  had 
an  open  sesame  upon  the  purse-strings  of  Europe  for 
half  a  century,  is  a  fact.  Nations  in  need  of  cash  had 
to  apply  to  the  Rothschilds.  The  Rothschilds  didn't  loan 
them  the  money — they  merely  looked  after  the  details  of 
the  loan,  and  guaranteed  the  lender  that  the  interest 
would  not  be  defaulted.  Their  agencies  everywhere  were 
in  touch  with  investors. 

"For  their  services  the  Rothschilds  asked  only  a  modest 
fee — a  fee  so  small  it  was  absurd — a  sixteenth  of  one  per 
cent.,  or  something  like  that.  The  bonds  were  issued  and 
offered  at  par.  If  they  would  not  sell  at  par,  they  were 
placed  on  'Change  and  sold  at  what  they  would  bring. 
What  wasn't  taken  by  the  public,  brought,  oh,  say  around 
seventy-five.  Unkind  people  say  that  the  Rothschilds 
beared  all  bonds  which  they,  themselves,  desired  to  buy. 
It  wasn't  their  fault  if  Leopold's  credit  was  bad, — mein 
Gott  im  Himmel ! 

"It  is  safe  to  say  that  there  is  but  one  government  in 
the  world  that  has  not  at  some  time  or  anotiuT  from  1815 
to  1870  courted  the  Rothschilds  with  intentions."  (Elbert 
Hubbard.  A  Visit  to  the  Uome  of  Mayer  Anselni  Roths- 
child.) 

2  Jewish  Encyclopedia. 


12  UNSEEN  EMPIRE 

3.  On  the  repurchase  of  gold  from  Welling- 
ton. 

4.  On  the  sale  to  Portugal  of  the  gold  bought 
back  of  Wellington. 

Later  came  "bear"  operations  looking  to  the 
purchase  of  the  British  bonds,  and  the  crowding 
out  of  rivals  (Baring:  Goldschmid)  in  subsequent 
deals  of  a  similar  sort.  The  sum  now  owned  by 
the  House  of  Rothschild  has  been  estimated  at 
$2,000,000,000  net.  The  properties  controlled 
are  manifold.  According  to  Mr.  E.  A.  Powell, 
"they  hold  one  hundred  millions  of  dollars  of 
American  securities  alone.  They  own  large  es- 
tates in  Great  Britain,  Germany,  Austria,  and 
France,  cotton  factories  at  Manchester,  cutlery 
establishments  at  Sheffield,  ships  on  the  Clyde, 
warehouses  in  Lojidon  and  Liverpool,  gardens  near 
Paris,  castles  on  the  Rhine  and  villas  on  the 
Riviera,  mills  along  the  Maas,  gold  mines  in  Cali- 
fornia, statues  in  Rome,  dahabiychs  on  the  Nile, 
plantations  in  Jamaica,  shawls  in  India,  rubies  at 
Teheran,  tobacco  fields  in  Virginia,  forests  in 
Siberia,  towns  in  Australia.  They  call  themselves 
merchants  as  well  as  bankers,  and  in  the  largest 
sense  they  are  both."  And  they  are  pawnbrokers 
as  well,  still  "in  the  largest  sense." 

The  House  of  Rothschild  adopted  early  these 
rules  of  management : 

1.  The  different  banks  should  each  act  in  the 
common  interest,  regardless  of  the  purposes  of 
the  nation  in  which  it  might  be  placed. 


BANKING  AND  "PAWNBROKING"     13 

2.  They  should  never  deal  with  unsuccessful 
people. 

3.  They  should  not  demand  excessive  profits. 

4.  They  should  never  "put  all  their  eggs  in 
one  basket." 

5.  They  should  always  be  prepared  to  sell 
out  quickly  in  case  of  prospective  failure. 

6.  They  should  take  advantage  of  all  help  to 
be  gained  from  the  press.^ 

Bankiiig  and  "Pawnbroking" 

I  have  spoken  of  the  early  loans  of  the  House 
of  Rothschild  as  "pawnbroking" ;  I  may  for  a 
moment  digress  to  insist  on  a  certain  distinction 
between   banking   and   "pawnbroking." 

Banking,  properly  speaking,  deals  with  "go- 
ing concerns."  It  is  a  provision  by  which  free 
or  idle  money  may  be  gathered  together  and  con- 
verted into  active  capital.  Through  the  banker, 
money  on  deposit  is  placed  in  the  hands  of  those 
who  by  industrial  or  commercial  enterprise  can 
make  it  grow. 

"Pawnbroking,"  broadly  speaking,  deals  with 
failure  or  waste.  Its  usual  function  is  to  af- 
ford means  for  some  act  of  extravagance,  or  es- 
cape from  some  complication  of  past  folly  or  mis- 
fortune. The  extravagance,  folly  and  misfortune 
of  nations   is   summed  up  in  war.     Pawnbroking 

3  And  at  one  time,  a  seventh  rule  existed:  They  should 
not  lend  to  Russia,  so  long  as  Jews  were  persecuted  in 
that  country. 


14  UNSEEN  EMPIRE 

among  nations  thus  concerns  itself  mainly  with 
past  war  or  future  preparation,  in  either  case 
withdrawing  the  revenues  concerned  from  all  pro- 
ductive  use. 

As  there  are  many  nations,  ruled  by  statesmen 
of  the  day,  ready  to  sacrifice  the  future  for  the 
present,  as  no  protecting  deity  watches  over  their 
financial  operations,  and  as  there  exists  no  official 
check  to  national  debt,  it  is  clear  that  the  busi- 
ness of  the  international  pawnbroker  may  be  a 
profitable  one.  At  the  same  time  one  must  know 
where  to  stop.  To  guard  over  waste  and  folly 
is  no  sinecure.  The  cream  of  the  business  of  in- 
ternational pawnbroking  has  been  now  skimmed 
off,  later  loans  often  lowering  the  values  of  earlier 
ones,  and  in  general  only  weak  states  in  desperate 
luck  are  eager  to  pledge  their  future  revenues. 

The  Unseen  Empire  of  Finance 

Up  to  the  middle  of  the  nineteenth  century  the 
great  House  of  Rothschild,  with  its  branches  in 
five  leading  capitals  of  Europe,  held  almost  a 
monopoly  of  national  loans  and  of  the  control  im- 
plied by  these  loans."*      Later,  with  the  passing  of 

4  I  am  informed  by  a  friend,  a  leading  banker,  that  the 
House  of  Rothschild  to-day  has  larpoly  withdrawn  from 
that  type  of  banking  which  deals  with  war  and  war  debts. 
"They  are  now  rarely  at  the  head  of  syndicates  under- 
taking national  loans,  leaving  this  to  the  large  banking 
corporations  in  the  various  money  centers  and  only  occa- 
sionally participating  in  the  operations  of  these  syndi- 
cates. The  house  is  now  known  more  as  a  group  of  cap- 
italists  participating   in   industrial   enterprises,   discounting 


UNSEEN  EMPIRE  OF  FINANCE       15 

the  founders  of  the  house  and  with  the  growth  of 
other  similar  concerns,  the  leadership  of  finance 
becomes  more  and  more  impersonal.  The  in- 
dividual gives  place  to  a  system  and  the  mas- 
tery of  the  Rothschilds  is  obscured  in  the  rise 
of  "The  Unseen  Empire  of  Finance."  "The 
Credit  of  Europe"  and  "Das  Consortium"  are 
phrases  of  like  significance. 

Among  the  colleagues  and  rivals  of  the  Roths- 
childs, their  associates  in  the  "Unseen  Empire," 
we  may  enumerate  a  few  of  the  most  prominent. 

In  France  the  House  of  Pereire  is  noted  for 
its  many  enterprises.  The  "Ligne  du  Nord,'* 
"the  Ligne  du  Sud,"  the  "Compagnie  Generale 
Transatlantique,"  and  the  "Credit  Mobilier"  are 
among  its  creations.  The  House  of  Fould  was 
the  supporter  of  Napoleon  III.  The  name  of 
BischofFheim  stands  alike  for  the  finance  and  the 
philanthropy  of  France. 

In  Germany,  the  name  of  Bleichroder  is  forever 
associated  with  that  of  Bismarck  and  the  down- 
fall of  the  third  Napoleon.^ 

paper  and  profitably  investing  its  surplus  funds  and  those 
of  their  old  clients,  many  of  whom  have  in  late  years 
drifted  to  the  larger  banking  operations.  Last  year  the 
loan  to  Turkey  was  negotiated  by  the  Deutsche  Bank  of 
Berlin,  with  Rothschild's  and  other  large  German  and 
Austrian  banking  institutions  as  participants  in  the  syndi- 
cate   formed    for   this   loan." 

5  "At  the  treaty  of  Versailles  in  1871,  at  the  close  of  the 
Franco-Prussian  War,  Bismarck  made  a  demand  for 
Alsace  and  Lorraine,  and  for  an  indemnity  of  5,000,OUO,000 
of  francs.     The  French  representatives,  Thiers  and  Favre, 


16  UNSEEN  EMPIRE 

The  name  of  Camondo,  "Citizen  of  Venice," 
stands  out  as  that  of  the  supporter  of  Turkey, 
*'Uncle"  to  the  successive  sultans.  Through  the 
House  of  Camondo,  Turkey  has  acquired  the  debt 
of  $500,000,000,  which  has  been  her  salvation  as  a 
European  power.  The  "sick  man  of  Europe" 
was  kept  alive  until  his  debts  should  be  secured. 
The  Goldschniids  in  London  were  already  great 
loan  agents  in  the  days  of  Pitt,  worthy  rivals  of 
the  Rothschilds.  The  Houses  of  Goldschmid  and 
Stern  in  London,  united  by  marriage,  have  made 
Portugal  their  own,  besides  holding  large  invest- 
ments in  the  bonds  of  other  lands. 

In   Russia,   Baron   Horace  Giinzburg  ^    of   St. 

insisted  passionately  and  even  with  tears  that  the  indem- 
nity named  was  utterly  impossible;  that  France  was 
wholly  unable  to  pay  it  or  any  sum  approacliing  it;  and 
that  if  counting  it  had  begun  at  the  birth  of  Christ,  it 
would  not  yet  be  finished.  To  this  Bismarck  replied,  'But 
I  have  provided  for  that  very  difficulty, — I  have  brought 
from  Berlin  a  little  man  who  begins  counting  long  before 
the  birth  of  Christ';  and  upon  this  he  introduced  the 
Jewish  banker,  Bleichroder,  who  found  no  difficulty  in 
proving  that  France  was  so  rich  that  the  indemnity  asked 
was   really  too   small. 

"Bismarck  further  claimed  Strassburg  and  Metz  for 
Germany  on  the  ground  that  there  had  been  twenty-three 
unprovoked  invasions  of  Germany  from  France,  in  days 
gone  by,  and  not  one,  save  in  retaliation,  from  Germany 
into  France,  Germany  was  henceforth  drtermincd  to  keep 
the  key  to  her  two  western  doors  in  her  own  hands," 
(Andrew  D,  ^\^^ite:  Seven  Great   Statesmen.) 

6  "Baron  Giinzburg  lives  in  Russia,  where  the  name  of 
Hebrew  is  synonymous  with  persecution.  But  when  the 
Minister  of  Finance  wants  to  raise  a  loan  or  seeks 
financial  advice  he  does  not  send   for  the   Baron  to  come 


UNSEEN  EMPIRE  OF  FINANCE       17 

Petersburg  has  been  noted  as  a  leader  in  finance, 
equally  as  the  promoter  of  culture  among  the 
Jewish  people. 

Still  more  widely  known  and  equally  respected 
is  the  House  of  Hirsch  ^  in  Austria,  as  famous  for 

to  him.  He  deems  it  wiser  to  go  to  the  Baron,  for  this 
shrewd,  intolerant  old  man  is  one  of  the  Masters  and 
every  one  in  Russia  knows  it  from  the  moujik  to  the 
Czar."     (E.  A.  Powell.) 

7  It  is  said  that  the  Baron  Maurice  de  Hirsch  spent, 
from  time  to  time,  over  $100,000,000  in  charities  largely  in 
aid  of  the  people  of  his  race.  At  the  death  of  his  son 
he  said,  "My  son  I  have  lost,  but  not  my  heir;  humanity 
is  my  heir."  Referring  to  the  emigration  of  the  Jewish 
people  from  Russia  he  declared  that  "Russia  would  suffer 
from  the  loss  of  her  Jews,  until  to  those  who  remained 
she  would  grant  civil  rights,  or  else  she  would  fall,  as 
she  deserves,  the  logical  victim  of  her  own  intolerance." 
Baron  Hirsch  held  through  life  one  constant  aim,  that 
of  turning  the  Jews   from  the  cities  to  the   farms. 

"When  Baron  INIaurice  died  it  is  said  that  he  left  a 
fortune  estimated  at  anpvhere  from  two  million  to  five 
hundred  million  dollars.  He  controlled — and  his  heirs  still 
control — the  railway  systems  of  all  southeastern  Europe. 
Every  egg  that  is  laid  in  the  Balkans  for  European  con- 
sumption, every  yard  of  cloth,  every  rifle,  every  jack- 
knife  that  is  sold  south  of  the  Danube  pays  a  toll  to  the 
fortune  of  the  shrewd  old  Baron.  With  the  vision  of  a 
prophet  this  man  wove  webs  of  railways  through  those 
districts  in  the  Balkan  peninsula  which  had  theretofore 
been  as  inaccessible  as  if  they  did  not  exist,  and  brought 
a  market  and  employment  to  those  men  in  skirts  and 
turbans  such  as  had  never  before  stimulated  their  indus- 
try  or   rewarded  their   toil."     (E.    A.   Powell.) 

"The  general  impression  of  Baron  Hirsch  was  of  a  man 
with  tremendous  will  power,  the  instinctive  genius  and 
the  iron  strength  of  the  predestined  financier  on  the 
grand  scale,  the  kind  of  man  that  creates  a  world-wide 
trust  in   the   United   States. 


18  UNSEEN  EMPIRE 

its  great  enterprises  as  for  its  gains  in  the  field 
of  pawnbroking. 

The  House   of   Cassel   is  intimately   associated 
with  the  credit  of  Europe,  and  even  better  known 


"After  he  had  made  his  colossal  fortune,  Baron  Hirsch 
became  a  prominent  figure  in  the  social  life  of  at  least 
three  great  countries.  He  had  vast  estates  in  Austria, 
a  palace  in  Paris,  a  sporting  estate  in  England.  He  soon 
became  a  man  whom  it  was  dangerous  to  cross. 

"The  Jockey  Club  in  Paris  refused  him  admittance 
within  its  doors.  He  bought  the  house  over  their  head. 
In  Austria,  the  stiff  traditions  of  court  and  society  made 
his  social  way  difficult,  but  again  he  was  always  able  to 
vindicate  his  position  in  a  dramatic  manner,  for  the  then 
Prince  of  Wales  was  glad  to  accept  the  invitation  to  his 
great   sporting    parties. 

"In  London  he  had  innumerable  friends,  was  a  power- 
ful person  in  court  circles,  and  was  everywhere  received 
with  open  arms.  And  finally  when  he  died,  he  was  seen 
to  ha%'e  that  intense  feeling  for  humanity  which  is  charac- 
teristic of  his  race,  who  are  at  once  the  most  materialistic 
and  the  most  idealistic  race  in  the  world,  by  leaving  gi- 
gantic sums  for  charitable  purposes,  and,  above  all,  for 
the  transfer  of  the  oppressed  of  his  race  who  wanted  to 
leave  the  ghettos  of  Europe  for  better  chances  and  more 
liberal  institutions  in  other  lands." — (T.  P.  O'Conner, 
Chicago  Tribune,  Jan.  21,  1911.) 

Baron  de  Forest  of  London,  a  son  of  Baron  Hirsch, 
has  become  conspicuous  in  another  field,  as  a  champion  of 
democracy  and  as  an  opponent  of  war  and  debt  as  well 
as  in  the  overlordship  of  finance  which  by  inheritance  be- 
longs  to  him.     Mr.   O'Conner   continues: 

"Here,  the  idealism  of  the  father  is  breaking  out,  but 
in  an  entirely  new  direction.  And  this  idealism,  with  its 
gospel  of  sympathy,  above  all,  for  the  toilers  and  the 
poor,  came  from  a  man  who  might  well  have  been  in 
the  other  camp — who,  if  he  had  been  an  ordinary  man, 
would  undoubtedly  have  been  in  the  other  camp." 


UNSEEN  EMPIRE  OF  FINANCE       19 

in  connection  with  a  great  engineering  achieve- 
ment in  Egypt.** 

The  Sassoons  were  the  Rothschilds  of  the  Orient, 
— their  influence  dominant  in  finance  from  Yoko- 
hama to  Bombay. 

The  names  of  Mendelssohn,  patron  of  Hum- 
boldt, of  Montefiore,  owner  of  Australian  debt,  are 
better  known  for  their  good  deeds  than  for  their 
part  in  international  finance,  large  as  their  in- 
vestments have  been.  With  the  names  of  Werth- 
heimer  of  Austria,  scholar  and  "Judenkaiser,"  and 
Ralli  of  Athens,  "Lord  of  the  Levant,"  we  com- 
plete the  visible  circuit  of  the  leading  names  in 
the  mastery  of  Europe.  In  the  same  class  be- 
longs the  house  of  J.  P.  Morgan  &  Co.  in  America. 

"It  must  not  be  imagined,"  says  Mr.  Powell, 
"that  these  several  groups  of  capitalists  are 
either  rivals  or  competitors.  For  what  would  be 
the  use?  They  have  divided  the  world  among 
them,  America  alone  excepted.  As  a  matter  of 
fact,  they  are  all  not  only  friendly,  but  are  al- 
8  "The  land  of  Egj^it  was  uneasy  and  unhappy,  for  the 
Lord  had  withheld  the  rains  in  Abyssinia  and  the  Nile 
ran  dry  and  the  cotton  crops  wilted  away  under  the  burn- 
ing African  sun.  From  London  came  a  banker,  Cassel  by 
name,  and  built  a  great  dam  across  the  Nile  up  near  As- 
suan  and  the  waters  poured  forth  over  the  parched  land 
even  as  they  had  when  his  ancestor  smote  the  rock,  and 
the  blue*-shirted  fellaheen  rose  up  and  called  him  blessed. 
They  made  him  a  Baronet — whether  because  he  built  the 
dam  or  rescued  the  English  king  from  bankruptcy  I  do 
not  know — and  in  Egj'pt  he  is  more  powerful  than  the 
Khedive  and  the  British  consul-general  rolled  into  one." 
(E.  A.  PoweU.) 


20  UNSEEN  EMPIRE 

lied  to  one  another  by  so  many  close  ties  of  blood, 
marriage  and  business  that  it  requires  but  a 
stretch  of  the  imagination  to  describe  them  as  a 
single  great  group,  syndicate,  dynasty,  empire 
— The  Unseen  Empire  of  Finance. 

"To  recount  the  accomplishments  of  this  hand- 
ful of  men  is  to  recount  the  history  of  Europe 
for  the  last  three-quarters  of  a  century.  Twice 
have  the  Rothschilds  saved  the  Bank  of  England 
from  suspension ;  thanks  to  the  ability  of  old 
Baron  Alphonsc,  France  was  enabled  to  pay  the 
indemnity  of  five  milliards  of  francs  which  Ger- 
many had  imposed  in  the  expectation  that  it  would 
crush  her  for  a  generation.  It  was  on  the  money- 
bags of  the  Foulds  and  not  on  the  bayonets  of 
his  soldiers  that  Louis  Napoleon  reached  his  un- 
stable throne.  It  was  Gerson  von  Blcichroder 
who  extricated  the  Prussian  Government  from  its 
financial  difficulties  in  1865,  played  a  great  part 
in  financing  the  war  of  1870-71,  and  for  his  serv- 
ices as  financial  adviser  on  the  question  of  the 
war  indemnity  had  the  Iron  Cross  pinned  to  his 
breast  at  Versailles  by  the  old  Emperor  William 
himself.  Hirsch  opened  up  the  Balkan  states  to 
commerce  and  civilization ;  Cassel  proved  himself 
the  latter-day  Moses  of  the  Egyptians;  Gold- 
schmid,  by  his  gigantic  railway  schemes,  gave 
Germany  a  commercial  empire  in  Western  Asia.'* 

The  Gratitude  of  Nations 

The     masters     of    finance     have    no     need     of 


GRATITUDE  OF  NATIONS  21 

blandishments.  The  coaxing  has  been  all  on  the 
other  side.  The  nations  who  go  into  debt  do  so 
with  their  eyes  open.  The  indebtedness  of  Aus- 
tria to  the  House  of  Rothschild  brought  rank  and 
title  to  the  five  brothers  at  once.  That  similar 
gratitude  has  been  felt  by  other  subservient  na- 
tions is  shown  by  a  moment's  glance  through  the 
biographies  of  international  bankers.^ 

Here  we  note  the  names  of  Baron  Nathan 
Rothschild,  the  founder  of  "high  finance,"  Baron 
Alphonse  de  Rothschild  of  Paris,  Baron  James 
Rothschild  of  Paris,  Baron  Karl  Rothschild  of 
Naples,  Baron  Salomon  Rothschild  of  Vienna, 
Baron  Albert  Rothschild  of  Vienna,  Sir  Anthony 
Rothschild  of  London,  Baron  Lionel  Rothschild 
of  London,  Lord  Nathan  Rothschild  of  London 
(the  present  head  of  the  house),  Baron  Mayer 
Rothschild  and  lastly  Baron  Willy  Rothschild  of 
Frankfort  under  whose  perhaps  too  conscientious 
hands  the  original  bank  was  suspended.  Again, 
Sir  Ernest  Cassel,  Sir  Moses  Montcfiore,  Count 
Abraham  Camondo,  Baron  Sir  Edward  Albert 
Sassoon,  Baron  Maurice  de  Hirsch,  Baron  de  For- 
est, Baron  Herman  Stern,  Viscount  Stern  and 
Sydney  Stern  now  Baron  Wandsworth.  Among 
the  Goldschmids,  we  find  Sir  Isaac,  created  Baron 
de  Palmeira  by  the  king  of  grateful  Portugal 
whose  control  he  shares  with  his  relative,  the  Vis- 
count Stem.  In  St.  Petersburg,  Baron  Horace 
Giinzburg   and  Gabriel  Giin/.burg  of  Wilna,  the 

9  As  given  in  the  Jewish  Encyclopaedia. 


UNSEEN  EMPIRE 


latter  not  a  baron  but  granted  as  a  special  favor 
the  title  of  "honorary  and  hereditary  citizen"  of 
Russia.  All  these  and  others  bear  in  their  de- 
gree testimony  to  the  fact  that  nations  and  mon- 
archs  in  distress  are  not  ungrateful. 

"Money  Power" 

In  this  discussion  one  may  freely  admit  the 
sturdy  virtues  of  the  founders  of  the  House  of 
Rothschild,  and  agree  that  manj-  of  their  suc- 
cessors in  finance  have  been  high-minded  men. 
Nor  need  we  belittle  their  achievements  in  the  in- 
dustrial development  of  the  world,  nor  their  gen- 
erous part  in  European  philanthropy.  But  this 
fact  remains :  Each  of  these  great  fortunes  was 
established  on  national  waste,  ordered  by  the 
people  under  the  forms  of  constitutional  govern- 
ment and  in  the  interest  of  war. 

It  is  also  of  course  true  that  the  so-called 
*'Money  Power"  of  the  world  has  had  many 
sources  and  many  manifestations  not  connected 
with  national  debt,  To  follow  these  in  their  vari- 
ous ramifications  is  no  part  of  the  purpose  of  this 
book. 

The  recent  situation  in  regard  to  interna- 
tional finance  is  summed  up  by  I\Ir.  E.  Alexander 
Powell  ^"  in  a  statement  which,  however,  dramatic, 
can  hardly  be  called  an  exaggeration.  Mr. 
Powell   says : 

"The  European  peoples  are  no  longer  under  the 

^0  Saturday  Evening  Post,  June  19,  1909. 


"MONEY  POWER"  23 

Governments  of  their  respective  nations.  They 
have  passed  under  another  scepter.  They  have 
become  the  subjects  of  another  Power — a  Power 
unseen  but  felt  in  palace  as  in  cottage,  in  Rus- 
sia as  in  Spain,  by  every  parent  and  child,  by 
every  potentate  and  every  laborer.  No  nation  on 
the  European  continent  has  any  longer  an  inde- 
pendence that  is  more  than  nominal.  The  polit- 
ical autonomy  of  every  one  of  them  has  been  sur- 
rendered to  the  will  of  a  despotism  before  which 
every  kingdom  and  empire  and  republic  fawns  in 
the  most  abject  subserviency. 

"Would  the  people  of  Great  Britain  have  you 
believe  that  they  are  free?  Great  Britain  owes 
a  war  debt  of  more  than  three  billion  eight  hundred 
millions  of  dollars.  By  it  she  is  bound  for  all  time 
and  eternity.  She  can  never  pay  the  debt  and 
she  knows  it.  She  never  expects  to  pay  it.  Of 
this  incalculable  sum  every  inhabitant  of  the 
United  Kingdom  owes  something  over  eighty 
dollars.  Every  child  born  under  the  Union  Jack 
between  Land's  End  and  John  O'Groat's  is  con- 
fronted with  a  bill  for  a  like  sum.  Such,  then  is 
the  thraldom  of  Great  Britain — and  'Britons 
never  shall  be  slaves.'  From  being  the  most  in- 
dependent sovereignty  that  ever  existed  in  the 
world  she  has  become  but  a  province  of  the  Un- 
seen Empire. 

"Is  thrifty,  industrious  France  the  exception? 
The  French  nation,  republic  though  it  is,  is 
shackled   hand    and   foot   with   the   chains   of   her 


24  UNSEEN  EMPIRE 

overwhelming  indebtedness — and  the  money-lords 
hold  the  keys.  Germany  likewise  has  fallen  before 
their  stealthy  advance.  The  Gennan  Empire, 
notwithstanding  the  bloody  victories  by  which  it 
came  into  being,  notwithstanding  its  array  of 
battleships  and  avalanche  of  armies,  notwithstand- 
ing the  mighty  weapon  which  Bismarck  forged  and 
placed  in  its  hand — the  financiers  picked  their 
steps  in  the  days  of  that  grim  old  man — dares 
not,  any  more  than  any  other  European  nation 
dares  not,  take  any  important  step — to  colonize 
in  China  or  the  Cameroon,  to  build  a  warship,  to 
dig  a  canal,  to  contract  for  a  new  rifle,  to  sign 
a  treaty — without  first  making  petition  to  the 
occult  Powers  of  ^Nloney  who  rule  and  reign  from 
the  sandy  isles  of  Friesland  to  the  charcoal-burn- 
ers' huts  of  the  Bohmcr  Wald." 

The  bankers  of  to-day  hold  Europe  in  peace, 
because,  indeed,  they  hold  Europe!  ^^ 

11  "In  the  security  necessary  for  international  invest- 
ments lies  the  prime  hope  of  the  world's  peace.  .  .  . 
The  Jews,  the  original  missionary  people  in  whom 
the  families  of  the  Earth  were  to  be  blessed,  have  made 
the  millennium  possible  by  the  creation  of  the  Bourse." 
(Israel  Zangwill:  Italian  Fantasies,  1910.) 


III.     THE  UNSEEN  EMPIRE  OF  DEBT 

In  this  chapter  is  given  a  brief  account  of  the 
rise  and  growth  of  the  national  debt  in  certain 
of  the  leading  nations.  In  these  matters  the 
fault,  where  fault  there  is,  must  be  placed  mainly 
on  the  shoulders  of  the  borrowers.  The  great 
masters  of  finance  have  played,  in  general,  a  wait- 
ing part. 

War  Debt  and  Other  Debt 

The  extent  of  the  war  debt  of  the  individual 
nations  of  the  world  is  shown  in  Table  A,  as  given 
in  the  appendix  to  this  volume.  These  vast  sums, 
in  the  aggregate,  must  be  described  as  war  debt, 
because  without  war  all  other  debts  might  have 
been  long  since  paid.  It  is  quite  true  that  much 
of  this  money  has  been  borrowed  for  investment  in 
railways  and  other  productive  utilities.  Such 
has  been  especially  the  case  in  France,  where 
about  half  the  debt  has  had  its  apparent  origin 
in  expansion  of  national  improvements.  A  con- 
siderable part  of  the  debts  of  Prussia,  Italy  and 
Japan  are  of  this  nature,  as  also  most  of  the 
debt  of  Canada,  Australia,  and  New  Zealand.  In 
some  cases  these  investments  have  proved  unwise 
or  losing  ventures,  thus  adding  to  the  aggregate 
of  inert  debt. 

Yet  it  is  unquestionably  true  that  by   far  the 

greater  part  of  all  this  debt  had  its  origin  in  war, 

S5 


26  UNSEEN  EMPIRE 

and  that  in  the  last  fifty  years  the  aggregate 
repa^nnents  on  war  debt,  together  with  the  inter- 
est payments  on  such  debt,  have  greatly  exceeded 
the  total  amount  of  debt  of  non-military  origin. 
In  other  words,  if  it  had  not  been  for  war  and 
war  preparations,  the  natural  income  of  the  na- 
tions would  have  easily  paid  off  all  indebtedness, 
including  that  borrowed  for  industrial  and  com- 
mercial expansion. 

We  may  further  add  that  debt,  whatever  its 
origin,  is  still  debt  and  has  the  same  general  ef- 
fect of  restricting  the  financial  freedom  of  na- 
tions. Again,  in  all  lands,  non-military  debt,  in 
common  with  other  indebtedness,  tends  steadily 
to  increase.  The  nation  which  seeks  to  reserve  its 
available  funds  for  purposes  of  war  becomes  thus 
still  further  embarrassed.  Peace  revenues  should 
be  adequate  for  peace  purposes.  The  limit  of  safe 
borrowing  lies  in  the  ability  of  the  investment 
made  to  pay  its  way — to  cover  its  interest  charges. 
The  world  over,  deferred  payments  of  nations 
have  found  in  war  their  origin  and  their  excuse. 
The  national  debt  of  the  world,  when  fully  an- 
alyzed, is  war  debt  pure  and  simple. 

In  any  discussion  of  national  debt,  we  must  re- 
member that  other  branches  of  government  are 
not  sinless.  The  national  interest  charges  are  all 
superimposed  on  the  charges  paid  by  a  large 
system  of  local  and  municipal  indebtedness.  And 
to  this  again  is  added  the  burden  of  debt  carried 
by  the  individual  citizen.     Municipal  debt  has  in 


DEBT  OF  GREAT  BRITAIN  27 

every  land  been  a  factor  in  municipal  ownership 
of  utilities.  It  may  be  wise  and  legitimate  to  bor- 
row money  in  an  expanding  business  when  the 
capital  taken  yields  its  proper  return  in  interest. 
A  rapidly  growing  city  can  count  on  the  reduc- 
tion or  dilution  of  its  burden  by  an  increasing 
population.  But  to  borrow  money  to  postpone 
evil  days  without  adequate  means  to  meet  the 
interest  is  dangerous  and  demoralizing  for  munic- 
ipalities as  for  men  or  nations. 

There  is  much  to  be  said  for  government  owner- 
ship of  utilities,  railroads  for  example.  But  for 
a  government  to  buy  without  paying,  or  to  bor- 
row the  money  from  the  original  owners  to  pay 
for  the  roads,  is  merely  to  wager  that  govern- 
ment management  can  make  more  out  of  them  than 
private  owners  can.  It  may  be  justified  only  when 
it  succeeds.  On  the  whole,  most  borrowings,  state 
or  municipal,  fail  in  this  regard. 

The  experience  of  France  in  buying  the  "Ouest" 
system  of  railways  on  these  terms  is  a  case  in 
point.  The  semi-political  management  now  ex- 
isting is  at  a  disadvantage  in  every  way,  and  the 
system  has  been  a  source  of  increasing  loss  from 
the  time  the  government  acquired  it. 
Debt  of  Great  Britain 

The  bonded  debt  of  Great  Britain  *  properly 
1  The  account  of  the  growth  of  debt  in  Great  Britain, 
France,  Germany  and  the  United  States  is  chicHy  con- 
densed from  the  Credit  of  Nations,  by  Francis  W.  Hirst: 
Washington,  Senate  Document  No.  579,  1910.  Sec  also  the 
diagram  in  the  Appendix  of  this  volume. 


28  UNSEEN  EMPIRE 

begins  with  the  Revolution  of  1689.  Before  that 
time  the  King  of  England,  as  was  common  with 
monarchs  generally,  frequently  raised  sums  by 
the  pledge  of  jewels,  the  mortgaging  of  tempo- 
rary revenues  or  the  extracting  of  loans  (not  al- 
ways repaid)  from  the  Jews;.  In  the  war  of 
King  William  III  against  James  II  and  the  King 
of  France,  Parliament  was  "ready  to  pledge  the 
national  resources,  as  the  available  taxes  were  not 
adequate  for  the  operations  of  war.  By  thus 
forestalling  taxes,  the  foundations  of  the  great 
national  debt  were  laid.  Because  of  the  doubt- 
ful credit  of  Parliament  at  the  time,  the  loan  of 
£250,000  in  1690  could  not  be  had  at  less  than 
8%  interest.  Numerous  other  loans  followed,  for 
which  various  sources  of  revenues  were  pledged, 
as  customs  duties  and  finally  "taxes  on  bachelors, 
widows,  marriages,  births  and  burials."  Even  as 
thus  secured,  the  bonds  were  sold  at  a  heavy  dis- 
count. The  name  of  "Dutch  Finance"  was  ap- 
plied in  reproach  "by  old-fashioned  people  to  the 
various  devices  for  throwing  the  burden  of  ex- 
penditure on  posterity,  that  were  introduced 
along  with  William  of  Orange  and  'the  Glorious 
Revolution.'  " 

In  the  reign  of  Queen  Anne,  lotteries  were 
added  to  the  sources  of  revenue  and  an  era  of 
official  and  private  speculation  culminated  in  the 
"South  Sea  Bubble." 

In  the  reign  of  George  I,  quiet  and  frugality 
reduced   the    debt,   which   had    amounted   to   over 


DEBT  OF  GREAT  BRITAIN  29 

£12,000,000  in  the  reign  of  William  III  and  to 
£52,000,000  in  the  time  of  Queen  Anne.  Other 
wars  raised  the  figure  to  £129,000,000,  where  it 
stood  at  the  beginning  of  the  American  Revolu- 
tion in  the  reign  of  George  III.  "By  this  time 
it  was  clear  that  the  national  debt  was  advanc- 
ing at  a  dangerously  rapid  rate  and  the  whole 
of  it  had  been  spent  on  war."  The  war  with  the 
American  colonies  was  still  more  disastrous  from 
the  point  of  view  of  finance.  The  total  debt  at 
the  end  of  the  war  was  nearly  £250,000,000,  and 
the  value  of  the  "funds"  or  bonded  evidences  of 
debt  fell  with  each  increase  of  borrowed  money. 
At  every  British  defeat  they  fell  lower,  and 
scarcely  rose  with  British  victory.  "They  fell 
and  fell ;  the  capitulation  of  Lord  Cornwallis  re- 
duced them  to  54,  and  they  could  scarcely  have 
gone  lower  if  they  were  to  retain  any  value  at 
all."  The  lowest  point  indicated  by  INIr.  Hirst 
is  47. 

The  figures  above  named  indicate  only  the 
funded  debt,  which  had  risen  in  1814  after  Na- 
poleon's retirement  to  Elba  to  £743,000,000. 
After  Waterloo,  the  unfunded  debt  is  estimated 
at  £60,000,000  and  the  funded  debt  at  £826,000,- 
000.  This  gigantic  increase,  the  beginning  of 
what  we  may  call  world  bankruptcy,  was  due  to 
the  policy  of  Pitt  and  his  successors,  avowedly 
throwing  on  posterity  the  cost  of  the  downfall 
of  Napoleon. 

Retrenchment  has   at  different  times   made   re- 


30  UNSEEN  EMPIRE 

duction  in  this  debt,  the  most  extensive  and  suc- 
cessful effort  covering  the  period  between  the 
years  1887  and  1899.  Tliis  brought  the  value 
of  3%  consols^  up  to  110.  The  Crimean  war 
had  added  £33,000,000  to  the  debt.  Other  dan- 
gers to  credit  have  arisen  from  the  Imperial  De- 
fense Act  of  1889,  and  still  later  from  the  con- 
stant rise  in  military  and  naval  expenses. 

The  political  policy  which  preceded  the  Boer 
War  caused  the  steady  fall  in  value  of  the  con- 
sols. With  this  war  came  a  marked  depreciation 
of  credit  until  1901,  when  consols  stood  at  91^. 
The  Boer  War  raised  the  national  debt  from 
£635,000,000  (in  1899)  to  £798,000,000,  and 
"the  national  savings  of  thirty-six  j^ears  of  peace 
were  swept  away  by  national  borrowings  during 
three  years  of  war."  There  is,  however,  a  small 
but  regular  decrease  of  the  British  National  Debt 
which  goes  on  automatically,  through  the  opera- 
tion of  a  national  sinking  fund. 

At  the  present  time  English  consols  stand  near 
their  lowest  point,  76.  The  effect  of  this  de- 
preciation in  government  securities  may  be  il- 
lustrated by  the  history  of  the  Birkbeck  Bank  in 
London,  here  compiled  from  London  newspapers 
of  the  time. 

This  bank  was  noted  as  one  of  the  most  con- 
servative in  England,  its  reserve  being  largely 
in  consols  and  other  supposed  high-grade,  low- 
interest    securities.     It   went    into   insolvency   be- 

2  See  note  page  32. 


DEBT  OF  GREAT  BRITAIN  31 

cause  of  the  failing  price  of  these  securities.  It 
suspended  payment  on  June  8,  1911,  with  a  de- 
ficiency of  about  four  hundred  thousand  pounds. 
It  had,  shortly  before,  weathered  a  severe  run 
which  resulted  in  the  withdrawal  of  three  millions 
of  pounds,  little  of  which  had  been  returned. 
After  the  crash,  Bernard  Shaw  appealed  to  the 
government  to  come  forward  and  make  good  the 
four  hundred  thousand  pounds,  claiming  that  "it 
would  have  paid  us  as  a  nation  to  subsidize  the 
Birkbeck  to  four  times  this  sum  annually  had 
such  help  been  necessary.  Now  112,000  people, 
who,  if  they  had  their  houses  shaken  down  by  an 
earthquake  would  have  been  rescued  by  the  public 
as  a  matter  of  course,  are  thrown  into  the  most 
distressing  anxiety  and  threatened  with  a 
calamity  that  will  spread  far  beyond  the  direct 
sufferers."  Mr.  Shaw  therefore  begs  the  govern- 
ment to  reopen  the  doors  of  the  Birkbeck  Bank 
and  "to  give  it  hopes  of  such  an  annual  grant- 
in-aid  as  will  save  it  from  retreating,  like  the 
other  banks,  into  the  service  of  the  comparatively 
rich  only.  There  is  no  class  in  which  the  struggle 
for  existence  is  so  warring  and  incessant  as  in  the 
class  that  banked  at  the  Birkbeck.  Are  they  to 
be  abandoned  to  a  calamity  which  will  do  several 
millions'  worth  of  mischief  when  the  j'ield  of  about 
half  a  farthing  on  the  income-tax  would  avert 
it.?"  It  was  said  in  Parliament  b}'  an  official  that 
the  failure  of  the  bank  was  due  to  "Lloyd-George 
Finance."     The  Chancellor  of  the  Exchequer  re- 


32  UNSEEN  EMPIRE 

torted  by  showing  that  it  was  due  to  the  deprecia- 
tion in  the  value  of  securities  and  especially  of  the 
government  securities  known  as  conso'ls.^  "At 
the  time  of  the  Boer  War  the  reserve  was 
more  than  ample  to  cover  every  scrap  of  de- 
preciation. At  that  time  our  securities  began  to 
drop  away.  In  1899  certain  securities  stood 
at  112.  They  are  now  worth  85^.  Certain 
others  stood  at  101  in  1899,  and  now  at  84.  A 
factor  in  this  depreciation  is  the  Colonial  Security 
Act." 

In  Great  Britain  and  Ireland,  the  local  debts 
are  estimated  in  1901  at  £376,000,000,  in  1906 
at  £560,000,000.  These  are  growing  at  a  rapid 
rate,  but  they  differ  from  most  national  debts 
in  yielding  a  fair  interest  return.  Nevertheless, 
the  fact  of  a  rapidly  growing  municipal  indebted- 
ness in  every  city  greatly  complicates  the  problem 
of  national  debt  and  national  expenditure. 

Debt  of  France 

The  national  debt  of  France  dates  from  the 
French  Revolution.  But  the  Kings  of  France, 
on  the  theory  of  absolute  monarchy,  had  been  bor- 
rowers for  long  before.  The  earliest  king  to 
raise  loans  on  security  was  Francis  I.  He 
secured  money  from  the  city  of  Paris,  and  in 
return    alienated   certain    royal   privileges,   which 

3  Rigidly  interpreted,  the  issue  of  "consols"  (that  is, 
"Consolidated  Bank  Annuities")  is  not  the  borrowing  of 
money  directly,  but  through  the  sale  of  "perpetual  an- 
nuities." 


DEBT  OF  FRANCE  33 

became  known  as  "rentes  sur  I'Hotel  de  Ville." 
The  royal  debt  rose  in  1561  to  74,000,000  francs, 
a  sum  so  large  that  Catherine  de  jNIedici  thought 
to  reduce  it  by  the  seizure  of  ecclesiastical  proper- 
ties. The  clergy  evaded  this  by  a  new  debt, 
"rentes  sur  la  clerge,"  accompanied  by  various 
exemptions  from  taxation.  Under  Henry  IV 
the  debt  had  arisen  to  about  337,000,000  livres,^ 
which  Sully  reduced  by  about  100,000,000  livres. 
Afterwards  borrowing  became  habitual  and  under 
Louis  XIV,  the  prince  of  borrowers,  "the  finance 
ministers  had  a  hard  task  to  supply  their  mas- 
ter's prodigal  magnificence."  The  tontine  an- 
nuity became  a  popular  method  of  raising  money 
for  the  King.  This  state  of  affairs  was 
changed  by  the  great  economist  Colbert  who 
took  active  measures  to  reduce  the  debt,  "acting 
on  his  belief  that  rentes  were  a  most  useless  and 
expensive  possession  of  a  state.  He  had  no  be- 
lief in  the  benefits  of  credit.  In  his  eyes  loans 
were  always  made  by  idle  capitalists  for  unpro- 
ductive purposes  and  he  looked  upon  the  interest 
charge  as  an  improper  burden  on  the  taxes." 
This  sound  view  had  its  practical  disadvantage, 
for  war  was  actually  on  and  under  these  condi- 
tions Colbert  found  it  very  difficult  to  raise  any 
money  at  all.  It  is  the  device  of  the  deferred 
payment  which  makes  modern  war  preparation, 
and  therefore  modern  war,  possible  to  any  nation. 
With  the  death  of  Colbert  "all  sound  manage- 
*  Eighty-one   livres    tournois    equals    80    franes. 


34  UNSEEN  EMPIRE 

ment  vanished  from  French  Finance."  "Apres 
nous  le  deluge"  was  a  current  motto.  In  1715, 
at  the  end  of  the  reign  of  Louis  XIV,  the  debt 
stood  near  2,000,000,000  francs.  Afterwards, 
following  the  operations  of  John  Law  and  his 
reckless  colleagues,  it  rose  to  2,400,000,000 
livres.  Then  followed  a  period  of  bankruptcies 
and  forced  loans  called  "reductions  and  con- 
solidations of  debt."  With  Turgot,  under  Louis 
XVI,  came  a  period  of  retrenchment  and  wise 
management,  "neither  bankruptcy  avowed  nor 
masked  by  forced  reductions,  nor  by  increase  of 
duties,  nor  by  borrowing,"  a  policy  which,  in 
Hirst's  opinion,  might  have  saved  the  monarchy 
of  France.  But  Turgot's  successors,  Necker  and 
Calonne,  continued  to  borrow  and  confiscations 
on  a  large  scale  took  place  under  the  guise  of 
forced  loans  and  loans  repaid  in  paper  "assi- 
gnats." 

In  1793,  Cambon  created  a  great  body  of  pub- 
lic debt,  in  which  the  king's  indebtedness  took  the 
modern  form  of  a  national  debt.  It  had  now 
risen  to  a  capital  value  of  3,500,000,000  francs, 
which  was  cut  down  by  paper  money,  confisca- 
tions and  patriotic  loans,  in  1797,  to  800,000,- 
000  francs.  Thus  was  eased  the  strain  on  the 
government  at  the  expense  of  the  people,  caus- 
ing consternation  and  bankruptcy  far  and 
wide. 

Under  Napoleon,  the  issues  of  inconvertible 
paper   money    ceased   and   loans   were   avoided   so 


DEBT  OF  FRANCE  35 

far  as  possible.^  Napoleon  hated  debt,  but  his 
"policy  of  making  war  pay  its  way"  imposed 
very  heavy  annual  burdens  on  France  and  still 
heavier  ones  on  the  conquered  territories. 
France  thus  escaped,  however,  the  burden  of  per- 
manent debt,  and  her  financial  condition  under 
Napoleon  was  "enviable  compared  with  that  of 
the  victorious  Government  of  Great  Britain." 
The  aggregate  increase  of  French  debt  in  the 
time  of  Napoleon  was  about  140,000,000  francs. 
But  this  figure  in  no  degree  represents  the  money 
cost  of  Napoleon's  wars  either  to  France  or  to 
her  willing  and  unwilling  allies. 

Under  Louis  Philippe,  the  debt  steadily  rose 
until  it  reached  the  sum  of  3,540,000,000  francs. 
The  Second  Republic  was  a  period  of  financial 
disorder,  of  "forced  loans"  and  converted  obliga- 
tions, leading  to  a  capital  debt  of  4,620,000,000 
francs,  or  about  $920,000,000. 

The  Second  Empire  continued  the  policy  of  war 
(and  borrowing)  in  the  Crimea,  in  Mexico  and  in 
Italy.  It  fell  in  the  Franco-Prussian  war  of 
1870-1872,  a  struggle  unprecedented  in  Euro- 
pean history  for  cost  and  waste.  The  final  re- 
sult was  a  debt  of  9,000,000,000  francs.  "The 
enormous  stored-up  wealth  of  France  and  the  re- 
cuperative powers  of  the  nation   were  then  won- 

5  "You  htTve  supplied  and  paid  the  army;  you  have  re- 
mitted 30,000,000  francs  to  the  state  treasury;  you  have 
enriched  the  museum  at  Paris  with  SOO  objects,  the 
products  of  30  centuries."  (Napoleon,  1797,  at  Bassano. 
Address   to  His  Soldiers.) 


36  UNSEEN  EMPIRE 

derfully  displayed."  The  Germany  indemnity 
of  5,000,000,000  francs  was  promptly  paid  by 
two  loans  through  the  French  house  of  Roths- 
child, and  made  good  by  the  patient  industry  of 
the  people.  Then  followed  giant  loans  in  the  in- 
terest of  the  "great  programme"  of  schemes  of 
public  works  instituted  by  de  Freycinet.  The 
guarantee  of  interest  on  railways,  the  purchase 
of  the  Quest  system,  the  expansion  of  the  army 
and  navy,  the  cost  of  the  war  and  the  Commune 
brought  France's  debt  in  1908  to  the  unpre- 
cedented figure  of  30,161,000,000  francs.  This 
is  the  largest  aggregate  burden  yet  borne  by  any 
nation,  and  its  interest  charges  are  double  those 
of  Great  Britain.  It  is  true,  however,  that  the 
debts  of  the  other  Latin  nations  are  higher  in 
proportion  to  resources  than  that  of  France. 

The  local  indebtedness  of  France  has  grown  in 
like  proportion.  It  is  estimated  in  1906  at  4,- 
021,000,000  francs,  having  risen  from  about  60,- 
000,000  francs  in  1830.'' 

The  national  taxes  of  France  including  the  in- 
terest on  the  public  debt,  amount  to  very  nearly 
5,000,000,000  francs  yearly.  In  addition  to  this 
and  to  the  local  taxes  is  added  the  aggravation 
of  the  Octroi  or  local  impost  on  articles  enter- 
ing the  limits  of  town  or  city. 

8  For  a  diagram  of  the  growth  of  the  public  debt  of 
France,  the  reader  is  referred  to  the  Appendix  of  this  vol- 
ume. 


DEBT  OF  GERMANY  37 

Debt  of  Germany 

Germany,  as  a  consolidated  nation,  is  the 
youngest  of  the  Great  Powers,  her  territory  hav- 
ing been  for  centuries  the  battle  ground  of  her 
neighbors.  Since  the  establishment  of  the  Em- 
pire, her  bonded  indebtedness  has  risen  by  leaps 
and  bounds,  for  her  war  and  peace  expenditures 
have  been  on  a  grand  scale.  In  1877,  the  debt 
stood  at  72,000,000  marks.  It  is  supposed, 
however,  that  a  modest  sum,  commonly  stated 
as  120,000,000  marks,  had  been  held  over  out 
of  the  total  amount  received  from  France  in 
1873  and  still  rests  in  the  Julius  Tower  at 
Spandau.  But  against  even  this,  treasury  notes 
to  the  full  amount  have  been  issued  by  the  govern- 
ment.^ The  payment  of  the  indemnity  was  a 
heavy  burden  on  France,  but  its  effect  on  Ger- 
many was  equally  burdensome,  for  it  led  to  an 
era  of  speculation  and  unregulated  production, 
intensifying  those  evil  results  which  always  fol- 
low victory  in  war. 

"Norman  Angell"  (Ralph  Lane)  says  of  this 
experience :  ^ 

"The  decade  from  1870-1880  was  for  France 
a   great   recuperative   period,   and    for  Germany, 

1 1n  the  United  States,  the  deposits  of  gold  and  silver 
in  the  treasury  against  which  notes  have  been  issued  are 
not  counted  as  assets  of  the  government,  as  understood  by 
us.  The  "Imperial  War  Treasure"  at  Spandau  is  not  the 
property  of  the  Empire,  but  of  the  holders  of  the  notes 
issued   against  it. 

sThe   Great   Illusion. 


88  UNSEEN  EMPIRE 

after  a  boom  in  1872,  one  of  great  depression. 
We  know  that  Bismarck's  life  was  clouded  by 
watching  what  appeared  to  him  an  absurd  mir- 
acle: the  regeneration  of  France  after  the  war 
taking  place  more  rapidly  and  more  completely 
than  the  regeneration  in  Germany,  to  such  an  ex- 
tent that  in  introducing  his  Protectionist  Bill  in 
1879  he  declared  that  Germany  was  'slowly 
bleeding  to  death,'  and  that  if  the  present  proc- 
ess were  continued  she  would  find  herself  ruined. 
In  the  Reichstag,  May  2,  1879,  Bismarck 
said: 

"  'We  see  that  France  manages  to  support  the 
present  difficult  business  situation  of  the  civilized 
world  better  than  we  do ;  that  her  Budget  has  in- 
creased since  1871  by  a  milliard  and  a  half,  and 
that,  thanks  not  only  to  loans ;  we  see  that  she 
has  more  resources  than  Germany,  and  that,  in 
short,  over  there  they  complain  less  of  bad  times.' 

"And  in  a  speech  two  years  later  (Nov.  29, 
1881)  he  returns  to  the  same  idea: 

"  'It  was  towards  1877  that  I  was  first  struck 
with  the  general  and  growing  distress  in  Germany 
as  compared  with  France.  I  saw  furnaces 
banked,  the  standard  of  well-being  reduced,  and 
the  general  position  of  workmen  becoming  worse, 
and  business  as  a  whole  terribly  bad.' 

"Trade  and  industry  were  in  a  miserable  con- 
dition. Thousands  of  workmen  were  without  em- 
ployment, and  in  the  winter  of  1876-7  unemploy- 
ment   took    great    proportions    and    the    soup- 


DEBT  OF  GERMANY  39 

kitchens  and  State  workshops  had  to  be  estab- 
lished. 

"Every  author  who  deals  with  this  period 
seems  to  tell  the  same  tale.  'If  only  we  could  get 
back  to  the  general  position  of  things  before  the 
war,'  says  Maurice  Block  in  1879.  'But  salaries 
diminish  and  prices  go  up.'  ^ 

"In  examining  the  effect  which  must  follow  the 
payment  of  a  large  sum  of  money  by  one  country 
to  another,  we  saw  that  either  goods  must  be 
imported  by  the  nation  receiving  the  indemnity 
to  compete  with  those  produced  at  home ;  or  the 
gold  must  be  kept  at  home  and  prices  rise  and 
so  hamper  exportation ;  in  the  case  of  the  country 
losing  the  gold,  prices  must  fall  and  exports  rise. 
That  this,  in  varying  degrees,  is  precisely  what 
did  take  place  after  the  payment  of  the  indemnity 
we  have  ample  confirmation.  The  German  econ- 
omist. Max  Wirth  (Geschichte  der  Handelskri- 
seri)  expresses  in  187-1  his  astonishment  at 
France's  financial  and  industrial  recovery:  'The 
most  striking  example  of  the  economic  force  of 
the  country  is  shown  by  the  exports,  which  rose 
immediately  after  the  signature  of  peace,  despite 
a  war  which  swallowed  a  hundred  thousand  lives 
and  more  than  ten  milliards  ($2,000,000,000).' 
A  similar  conclusion  is  drawn  by  Professor 
Biermer,  who  indicates  that  the  Protectionist 
movement  in  1879  was  in  large  part  due  to  the 

9  "La  Crise  Economique,"  Revue  des  Deux  Mondes, 
March  15,  1879. 


40  UNSEEN  EMPIRE 

result  of  the  payment  of  the  indemnity,  a  view 
which  is  confirmed  by  Maurice  Block,  who  adds : 

"  'The  five  milliards  provoked  a  rapid  increase 
in  imports,  giving  rise  to  extravagance,  and  as 
soon  as  the  eflPect  of  the  expenditure  of  the  money 
had  passed  there  was  a  slackening.  Then  fol- 
lowed a  fall  in  prices,  which  has  led  to  an  in- 
crease in  exports,  which  tendency  has  continued 
since.' 

"But  the  temporary  stimulus  of  imports — not 
the  result  of  an  increased  capacity  for  consump- 
tion arrived  at  by  better  trade,  but  merely  the 
sheer  acquisition  of  bullion — did  grave  damage  to 
German  industry,  as  we  have  seen,  and  threw 
thousands  of  German  workmen  out  of  employ- 
ment, and  it  was  during  that  decade  that  Ger- 
many suffered  the  worst  financial  crisis  expe- 
rienced by  any  country  in  Europe." 

In  1908,  the  national  debt  stood  at  4,253,000,- 
000  marks,  the  lion's  share  of  it  having  been  paid 
out  for  the  army  and  a  steadily  increasing  per- 
centage for  the  navy.  To  these  sums  should  be 
added  the  debts  of  the  individual  states,  that  of 
Prussia  alone  having  grown  at  a  rate  compar- 
able with  that  of  the  burden  of  the  Empire.  The 
total  debt  of  the  Empire  and  all  the  states  was, 
in  1908,  14,362,000,000  marks  or  about  $3,- 
600,000,000,  which  is  not  far  from  the  debt  of 
Great  Britain.  The  debt  of  Prussia  arose  from 
1,965,000,000  marks  in  1881,  to  7,963,000,000 
in    1908.     Under    the    policy    of    Germany,    by 


DEBT  OF  UNITED  STATES  41 

which  the  expenses  of  the  army  in  time  of  peace 
are  met  mainly  by  loans,  we  may  expect  the 
steady  increase  of  the  national  debt  which  has 
been  rising  of  late  at  the  rate  of  60  to  100  mil- 
lions of  dollars  per  year.  This  is  balanced  in  a 
degree  by  the  extension  of  national  holdings, 
especially  in  the  financially  profitable  state  rail- 
way system.  On  the  other  hand  the  absorption 
of  German  capital  in  industrial  affairs  creates 
temporary  embarrassments  through  the  necessity 
for  short-time  loans  which  German  banks  cannot 
t^holly  cover  and  which  are  largely  drawn  from 
London,  Paris  and  New  York.  German  govern- 
ment bonds  range  at  about  80.  As  investments, 
I  am  told,  they  are  now  generally  avoided  by 
the  banks  as  undesirable  forms  of  security.  The 
day  is  past  when  the  war  debts  of  great  nations 
offer  especial  attractions  to  those  whom  in  the 
past  they  have  made  "masters  of  Europe." 

The  local  debt  in  Germany  as  in  other  coun- 
tries rises  steadily  with  the  extension  of  municipal 
improvements.  The  total  is  given  by  Mr.  Hirst 
as  over  7,400,000,000  marks.  It  is  said  that 
the  debts  of  the  German  towns  combine  financial 
security  with  a  high  rate  of  interest.  This  is 
due  to  their  excellent  municipal  management. 

Debt  of  the  United  States 

In  the  early  days,  most  of  the  Colonies  had 
embarrassed  their  finances  by  large  issues  of 
paper   money,   at   first   to    meet   war  emergencies 


4S  UNSEEN  EMPIRE 

and  afterwards  ordinary  expenses.  These  notes 
fell  rapidly  in  nominal  value  and  they  were 
finally  for  the  most  part  repudiated. 

At  the  outbreak  of  the  Revolution  the  same 
mischievous  practice  continued  on  the  part  of  the 
Continental  Congress  and  of  the  individual  states. 
The  notes  lost  in  value  until  "not  worth  a  Con- 
tinental" was  a  general  expression  of  worthlcss- 
ness.  It  is  said  that  Boston  was  in  1779  "on  the 
verge  of  starvation :  money  transactions  had 
nearly  ceased  and  business  was  done  by  barter." 

In  1787  the  Federal  Constitution  granted  Con- 
gress "power  to  borrow  money  on  the  credit  of 
the  United  States,"  while  forbidding  individual 
states  to  coin  money  or  to  emit  bills  of  credit. 
"The  Government  of  the  United  States,"  says 
Mr.  Hirst,  "inherited  from  the  states  of  which  it 
is  composed  the  vicious  principle  of  confounding 
debt  with  currency.  The  crude  notion  of  rais- 
ing money  by  debasing  the  currency  whether  by 
adulterating  the  metal  or  by  issuing  an  excess 
of  paper  has  now  been  relegated  to  the  least 
civilized  and  intelligent  states  of  the  world.  But 
traditions  die  hard  and  the  sj'stem  of  propping 
up  credit  by  currency  regulations  may  still  be 
traced  in  the  laws  of  the  United  States."  ^^ 

The  national  debt  once  started  grew  rapidly 
as  in  other  nations,  notwithstanding  the  influence 
of  wise  financiers,  notably  Albert  Gallatin. 

In  1816,  the  bonded  debt  stood  at  $127,000,- 
10  Hirst,   The   Credit   of  Nations,   p.   104. 


DEBT  OF  UNITED  STATES  43 

000.  In  following  years  of  peace  this  amount 
was  rapidly  reduced.  In  1835  it  stood  at  about 
$34,000,000.  Each  war  which  followed  was  ac- 
companied by  increase  of  debt.  The  Mexican 
War  added  $49,000,000  to  the  sum  total  which 
stood  in  1851  at  $68,000,000.  Succeeding 
governmental  extravagance  checked  its  natural 
reduction  so  that  in  1860  it  amounted  to  $64,- 
800,000.  The  Civil  War,  with  its  gigantic  ex- 
penses and  depreciated  currency,  raised  it  to  $2,- 
773,200,000.  The  country  had  been  flooded 
"with  short  time  paper  which  served  the  pur- 
pose of  currency,  expanded  prices  and  increased 
the  speculation  and  extravagance  always  in- 
cidental to  war.  Temporary  obligations  falling 
due  in  the  midst  of  civil  conflict  were  a  source  of 
double  vexation  to  the  Treasury  Department, 
which  was  obliged  to  conduct  a  series  of  refund- 
ing operations  and  at  the  same  time  to  go  into 
the  market  to  borrow  ever  increasins:  sums."  ^^ 

The  Confederate  states  met  their  expenses  al- 
most wholly  by  treasury  notes  which  served  as  the 
currency  of  the  people.  These  steadily  fell  in 
value,  until  they  became  worthless  and  the  first 
issues  were  repudiated  to  make  way  for  later 
ones  equally  worthless.  It  was  regarded  as  im- 
possible to  carry  on  war  by  means  of  taxes  alone. 
"This,"  says  White,  "was  a  mistake.  Except  for 
money  borrowed  abroad  every  country  pays  the 
cost  of  a  war  at  the  time  of  the  war.  All  of  the 
11  Dewey,  Financial  History,  p.  317,  as  quoted  by  Hirst, 


44  UNSEEN  EMPIRE 

debts  of  the  confederacy  were  obliterated  at  the 
end  of  the  war.  .  .  .  There  being  nobody 
else  to  pay  for  it,  the  people  of  the  Confederacy 
must  have  paid  for  it  during  the  time  of  the  war 
and  not  a  moment  later."  ^- 

After  the  war,  there  were  many  fluctuations 
in  the  values  of  paper  money,  and  several  finan- 
cial panics  in  which  the  relation  of  "greenbacks" 
and  of  silver  to  gold  bore  a  certain  part.  In 
1892  the  bonded  debt  had  fallen  to  $585,000,000. 
The  war  with  Spain  raised  it  to  $1,046,000,000 
in  1899.  In  1911  it  had  been  reduced  to  $915,- 
853,000. 

Up  to  1900,  "it  had  always  been  the  policy  of 
the  government  to  pay  its  interest-bearing  debts 
as  soon  as  possible  in  order  to  avoid  unnecessary 
burden  on  the  taxpayers."  But  at  present  this 
policy  has  been  more  or  less  cast  aside  in  the  in- 
terest of  military  expansion  and  unwarranted 
River  and  Harbor  improvements.  Old-time 
economists,  occasionally  found  in  Congress,  have 
rarely  succeeded  in  checking  the  extravagance 
which  the  politicians  and  armanent  syndicates  de- 
mand, and  which  the  people  seem  able  and  willing 
to  pay  for  with  borrowed  money. ^^     "I  know  but 

12  Horace  White,  Money  and  Banking,  p.  148,  as  quoted 
by  Hirst. 

13  In  connection  with  Table  A  in  the  Appendix,  Mr. 
Arthur  W.  Allen,  author  of  the  table,  makes  the  following 
explanation  of  the  reasons  why  the  gold  and  silver  certifi- 
cates are  not  to  be  regarded  as  part  of  the  national  debt. 

"In    the    account    of    the    national    debt    of    the    United 


DEBT  OF  LESSER  NATIONS  45 

one  way,"  said  Albert  Gallatin  in  1800,  "that  a 
nation  has  of  paying  her  debts,  and  that  is  pre- 
cisely the  same  that  individuals  practice ;  spend 
less  than  you  receive,  and  you  may  then  apply 
the  surplus  of  your  receipts  to  the  payment  of 
your  debts." 

The  local  debts  of  the  various  states,  counties 
and  municipalities,  mount  to  a  large  figure.  In 
1902,  the  sum  total  is  quoted  at  $1,765,000,000. 
This  with  all  other  items  in  the  record  is  steadily 
rising.  The  aggregate  indebtedness  of  the 
United  States  is,  however,  small  in  proportion  to 
her  resources  and  their  constantly  expanding  pos- 
sibilities. 

Debt  of  the  Lesser  Nations 

The  bonded  debts  of  the  smaller  countries  of 
Europe  need  not  be  discussed  in  detail.  In  gen- 
States,  given  in  table  A,  I  do  not  include  $1,461,600,000  in 
the  form  of  gold  and  silver  certificates.  Against  these 
certificates  there  is  held  their  exact  equivalent  in  gold 
and  silver  coin  or  bullion.  This  being  the  case,  though 
these  may  be  technically  included  in  the  debt  of  the 
United  States,  they  are  in  reality  mere  warehouse  receipts. 
From  the  business  point  of  view  they  are  no  more  a  debt, 
as  a  matter  of  fact,  than  is  a  bushel  of  wheat  or  a  bale  of 
cotton  or  a  piece  of  furniture,  for  which  a  warehouse  has 
issued  its  receipt.  These  articles  in  every  case  are  the 
property  of  the  person  holding  the  certificate,  and  the 
certificate  is  an  evidence  of  ownership — not  a  promise  to 
pay.  They  can  by  no  process  be  lawfully  used  for  the 
payment  of  any  other  obligation  of  the  warehouse." 

An  actual  obligation,  or  debt,  is  involved  in  the  issue  of 
treasury  notes  or  "greenbacks,"  unsecured  promises  to 
pay,  to  the  amount  of  $316,681,506. 


46  UNSEEN  EMPIRE 

eral,  they  have  followed  the  lines  indicated  in  the 
discussion  of  the  debt  of  France.  But  the  other 
nations  of  southern  Europe  have  borrowed  even 
more  recklessly  than  France.  The  debt  of  Italy, 
for  example,  is  nearly  half  that  of  France  while 
her  resources  are  only  about  one-fourth  as  great. 
The  debt  of  Spain  is  nearly  one-third  that  of 
France,  while  her  wealth  is  but  one-tenth.  The 
debt  of  Japan,  $287,500,000  in  1903  (less  than 
half  that  before  the  war  with  China)  since  the 
war  with  Russia,  has  risen  to  about  $1,325,000,- 
000.  The  debt  of  Persia  (about  $26,000,000) 
is  due  mainly  to  the  benevolent  attentions  of  her 
neighbors,  who,  in  the  words  of  the  London 
Times,  "are  exercising  control  over  her  for  her 
own  good."  Were  she  bound  hand  and  foot  to 
the  international  bankers  as  Turkey  is,  she  would 
be  regarded  as  fitted  for  a  career  as  an  inde- 
pendent nation. 

The  small  nations  which  have  given  up  the 
struggle  and  frankly  devoted  themselves  to  their 
own  business  are  more  or  less  definitely  free 
agents.  It  is  true,  however,  that  in  most  cases 
only  the  jealousies  of  their  larger  neighbors,  the 
^'balance  of  power,"  has  saved  them  from  absorp- 
tion. Among  these  nations  relatively  free  and 
prosperous, — prosperous  because  free, — are  Swit- 
zerland, Denmark,  Holland,  Belgium,  Norway 
and  Sweden.  In  each  of  these,  the  average 
wealth  of  the  common  citizens  runs  higher  in 
proportion  to  population    than   in   England   and 


RELATIVE  COST  OF  WAR  47 

Germany.  This  is  because  their  money  is  largely 
left  where  it  belongs,  in  the  hands  of  the  people. 
But  in  all  of  these  one  may  trace  the  influence 
of  the  evil  example  set  by  their  larger  neigh- 
bors. 

Canada  owes  over  $336,000,000,  none  of  it  war 
debt,  money  invested  in  "going  concerns"  of  her 
great  railways,  the  profits  of  which  are  largely 
returned  to  her  people. 

New  Zealand  has  little  actual  war  debt.  Her 
various  civic  experiences  she  has  purchased  at  a 
cost  of  a  bonded  debt  of  nearly  $346,000,000,  a 
large  sum  for  less  than  a  million  people,  but  their 
islands  are  unusually  rich  in  natural  resources, 
and  very  little  of  this  money,  about  six  per  cent 
only,  has  gone  into  the  waste  of  war.  This  in- 
cludes the  cost  of  Maori  wars  and  of  a  small 
armament. 

Australia  is  a  greater  nation,  less  favored  by 
nature,  and  from  the  liability  to  drouth,  subject 
to  greater  financial  risks.  She  has  no  war  bur- 
den save  what  she  has  patriotically^  and  needlessly 
assumed,  but  she  has  likewise  ventured  on  costly 
experiments,  the  burden  of  which  she  has  thrown 
on  generations  to  come. 

Relative  Cost  of  War 

Meanwhile,  during  the  nineteenth  century,  the 
wealth  and  resources  of  each  of  these  nations 
have  grown  with  unexampled  rapidity.  The  in- 
crease has  been  primarily  due  to  mechanical  in- 


48  UNSEEN  EMPIRE 

vention,  M'hich  applied  to  manufacture  and  com- 
merce has  enormously  augmented  the  effectiveness 
of  the  individual  man.  It  has  also  enabled  na- 
tions to  dispose  of  their  products  to  better  ad- 
vantage than  when  all  articles  produced  had  to  be 
consumed  within  a  limited  district.  Through  the 
development  of  commerce  all  nations  have  become 
neighbors  and  international  trade  is  now  one  of 
the  greatest  factors  in  human  society.  At  the 
same  time  have  come  better  adjustments  in  all  re- 
lations, a  better  division  of  labor  among  men,  and 
in  general  a  condition  in  which  men  of  all  parts  of 
the  world  may  contribute  to  each  other's  welfare. 
The  increase  in  wealth  vastly  exceeds  the  increase 
in  national  debt,  but  this  fact  has  been  more  or 
less  completely  neutralized  by  the  gigantic  ex- 
penditures on  war  preparation  to  which  nations 
have  been  incited  by  the  vastly  increased  cost  of 
war  itself.  Enormous  as  economic  growth  has 
been,  it  is  still  subject  to  the  check  involved  in 
Johnson's  law,  that  with  expanding  and  compet- 
ing nations,  "war  shall  consume  the  fruits  of 
progress."  The  burden  of  tax  and  debt  bears  just 
as  heavily  on  the  toiler  to-day  as  it  did  a  century 
ago,  and  this  notwithstanding  the  rapidly  growing 
political  importance  of  the  individual.  The 
superior  prosperity  of  certain  nations  is  due  to 
the  failure — for  various  reasons — of  expenditure 
to  keep  pace  with  growing  resources ;  in  other 
words,  such  nations  have  not  been  living  beyond 
their  means. 


RELATIVE  COST  OF  WAR  49 

"The  England  of  William  and  Mary,"  says 
Professor  Johnson,  "a  great  power,  conscious  of 
her  destiny  to  command  the  seas,  spent  on  her 
army  and  navy  about  the  same  amount  of  money 
that  Switzerland,  protected  by  treaties  and  the 
conflicting  interests  of  the  powers,  spends  on  her 
army  to-day.  The  England  of  1775,  facing  the 
revolt  of  her  American  colonies  and  confronted 
by  bitter  enemies  on  the  Continent,  spent  on  her 
army  and  navy  a  quarter  more  than  Belgium 
spends  to-day  on  an  army  that  might  almost  be 
said  to  exist  for  ceremonial  purposes  alone,  since 
Belgium  would  be  absolutely  helpless  in  case  of 
aggression  by  a  great  power. 

"Absolutely  considered,  modern  peace  is  un- 
questionably vastly  more  expensive  than  the  wars 
of  an  earlier  period.  True,  the  wars  involved  a 
large  destruction  of  property  and  loss  of  life  that 
never  figured  in  the  expenditures.  But  our 
statistics  for  times  of  peace  also  fail  to  include  the 
waste  of  time  entailed  by  universal  military  serv- 
ice and  the  waste  of  ability  in  organizing  so  vast 
an  enterprise  as  an  army  of  peace. 

"It  is  true,  of  course,  that  the  world  to-day 
is  incomparably  richer  than  the  world  of  Pitt  or 
of  Marlborough.  The  per  capita  burden  of  mod- 
ern armaments  would  have  been  almost  in- 
tolerable to  the  British  of  the  eighteenth  ccntur}"^ ; 
it  would  have  crushed  the  taxpayers  of  France 
or  Germany.  It  is  possible — though  not  very 
probable — that    the   burden    of   military   expendi- 


50  UNSEEN  EMPIRE 

turcs  signified  greater  hardship  to  the  average 
citizen  of  an  eighteenth  century  state  than  it 
signifies  to  the  citizen  to-day." 

Trusts  versus  War  Debt 

The  bonded  debt  of  the  United  States  amounts 
to  $915,353,000,  a  huge  sum  it  is  true,  but  of  rel- 
atively modest  proportions  as  compared  with  the 
debts  of  Europe.  Whether  our  burden  of  trusts 
and  privileged  interests  in  America  is  less  weighty 
than  the  load  of  war  debt  in  Europe  added  to 
their  own  burden  of  privilege  (none  the  less  op- 
pressive because  of  long  standing)  is  a  question 
aside  from  our  discussion.  But  the  war  debt  of 
Europe  certainly  presses  there  more  closely  and 
more  persistently,  especially  on  the  laboring 
class,  while  in  America  efforts  toward  the  re- 
moval of  privilege  have  been  more  continuous  and 
effective  than  most  similar  struggles  in  Europe. 
However,  as  the  present  generations  in  both 
Europe  and  America  have  been  born  to  this  debt, 
the  burden  pressing  everywhere  and  mostly  by  in- 
direction, the  individual  man  does  not  feel  it 
acutely.  It  is  like  the  pressure  of  the  atmos- 
phere, always  felt  and  therefore  not  recognized. 
But  a  release,  were  it  possible,  would  work 
enormous  social  and  economic  changes  in  the  long 
run  wholly  for  the  better.^'* 

Throughout  modern  history,  two  of  the  most 
effective  weapons  of  tyranny  have  been  the  De- 
i<  See  p.  1:27,  "Economic  DiflBcuIties  in  Disarmament." 


THE  SPENDTHRIFT  AGE  51 

ferred  Payment  and  the  Indirect  Tax.  By  the 
latter,  the  people  never  know  what  they  pay,  by 
the  former  all  embarrassments  are  thrown  on 
posterity.  The  men  of  to-day  are  the  posterity 
of  yesterday,  and  they  bear  on  their  shoulders  all 
that  the  nineteenth  century  has  shirked.  For 
debt  there  have  always  been  a  thousand  excuses, 
but  there  is  only  one  relief.  Nations  as  well  as 
individuals  must  pay  as  they  go. 

The  Spendthrift  Age 

The  expanded  credit  of  the  world,  according 
to  the  editor  of  Life,  may  be  likened  to  "a  vast 
bubble  on  the  surface  of  which,  like  inspired  in- 
sects, we  swim  and  dream  our  financial  dreams. 
We  have  long  since  passed  the  simple  or 
kindergarten  stage  of  living  beyond  our  incomes. 
We  are  now  engaged  in  living  beyond  the  incomes 
of  generations  to  come." 

Let  me  illustrate  by  a  supposititious  example.  A 
nation  has  an  expenditure  of  .$100,000,000  a  year. 
It  raises  the  sum  by  taxation  of  some  sort  and  thus 
lives  within  its  means.  But  $100,000,000  is  the 
interest  on  a  much  larger  sum,  let  us  say  $2,500,- 
000,000.  If  instead  of  paying  out  a  hundred  mil- 
lion year  by  year  for  expenses,  we  capitalize  it,  we 
may  have  immediately  at  hand  a  sum  twenty-five 
times  as  great.  The  interest  on  this  sum  is  the 
same  as  the  annual  expense  account.  Let  us  then 
borrow  $2,500,000,000  on  which  the  interest 
charges  are  $100,000,000  a  year.     But  while  pay- 


52  UNSEEN  EMPIRE 

ing  these  charges  the  nation  has  the  principal  to 
live  on  for  a  generation.  Half  of  it  will  meet  cur- 
rent expenses  for  a  dozen  years,  and  the  other 
half  is  at  once  available  for  public  pui'poses,  for 
dockyards,  for  wharves,  for  fortresses,  for  public 
buildings  and  above  all  for  the  ever  growing  de- 
mands of  military  conscription  and  of  naval 
power.  Meanwhile  the  nation  is  not  standing 
still.  In  these  twelve  years  the  progress  of  in- 
vention and  of  commerce  may  have  doubled  the 
national  income.  There  is  then  still  another 
$100,000,000  yearly  to  be  added  to  the  sum  avail- 
able for  running  expenses.  This  again  can  be 
capitalized,  another  $2,500,000,000  can  be  bor- 
rowed, not  all  at  once  perhaps,  but  with  due  re- 
gard to  the  exigencies  of  banking  and  the  temper 
of  the  people.  With  repeated  borrowings  the 
rate  of  taxation  rises.  Living  on  the  principal 
sets  a  new  fashion  in  expenditure.  The  same 
fashion  extends  throughout  the  body  politic.  In- 
dividuals, corporations,  municipalities  all  live  on 
their  principal. 

The  purchase  of  railwa3^s  and  other  public  utili- 
ties by  the  government  tends  further  to  compli- 
cate the  problems  of  national  debt.  It  is  clear 
that  this  system  of  buying  without  pa^'ing  cannot 
go  on  indefinitely.  The  growth  of  wealth  and 
population  cannot  keep  step  with  borrowing  even 
though  all  funds  were  expended  for  the  actual 
needs  of  society.  Of  late  3'ears  war  preparation 
has  come  to  take  the  lion's  share  of  all  funds  how- 


THE  BURDEN  OF  ARMA:\IENT        53 

ever  gathered,  "consuming  the  fruits  of  progress." 
What  the  end  shall  be,  and  by  what  forces  it  will 
be  brought  about,  no  one  can  now  say.  This  is 
still  a  very  rich  world  even  though  insolvent  and 
under  control  of  its  creditors.  There  is  a  grow- 
ing unrest  among  taxpayers.  There  would  be  a 
still  greater  unrest  if  posterity  could  be  heard 
from,  for  it  can  only  save  itself  by  new  inventions 
and  new  exploitations  or  by  a  frugality  of  admin- 
istration of  which  no  nation  gives  an  example  to- 
day. 

The  Burden  of  Armament 

Nevertheless  this  burden  of  past  debt,  with  all 
its  many  ramifications  and  its  interest  charges,  is 
not  the  heaviest  the  nations  have  placed  on  them- 
selves. The  annual  cost  of  army  and  navy  in  the 
world  to-day  is  about  double  the  sum  of  interest 
paid  on  the  bonded  debt.  This  annual  sum  repre- 
sents preparation  for  future  war,  because  in  the  in- 
tricacies of  modern  warfare  "hostilities  must  be 
begun"  long  before  the  materialization  of  any 
enemy.  In  estimating  the  annual  cost  of  war,  to 
the  original  interest  charges  of  upwards  of  $1,- 
500,000,000  we  must  add  yearly  about  $2,500,- 
000,000  of  actual  expenditure  for  fighters,  guns 
and  ships.  We  must  further  consider  the  gen- 
erous allowance  some  nations  make  for  pensions. 
A  large  and  uncstimatcd  sum  may  also  be  added 
to  the  account  from  loss  by  military  conscription, 
again  not  counting  the  losses  to  society  through 


64  UNSEEN  EMPIRE 

those   forms   of  poverty  which  have  their  primal 
cause  of  war.^^ 

For  nearly  a  hundred  years  the  armament 
budget  of  each  civilized  nation  has  been  increasing 
with  acceleration  and  in  one  way  or  another  it 
finds  ample  public  sanction  for  all  its  extrava- 
gances. It  bears  no  logical  connection  to  the  need 
of  defense  or  to  any  real  necessity  of  the  nation. 
Professor  Grant  Showerman  justly  observes  that 
"modern  peace  is  only  a  near  relation  of  war,  of 
a  different  sex,  but  of  the  same  blood."  It  is  the 
dormant  side  of  war.  In  the  words  of  Bastiat, 
*'War  is  an  ogre  that  devours  as  much  when  he  is 
asleep  as  when  he  is  awake."  It  must  be  noted, 
however,  that  in  all  lands,  voices  are  being  raised 
against  these  forms  of  extravagance,  though  as 
yet  most  of  them  are  "crying  in  the  wilderness." 
In  a  few  nations  only,  and  in  those  mainly  from 
reasons  of  tax  exhaustion,  has  there  been  any  at- 
tempt to  place  a  limit  on  such  expenditures. 

War  Expenditure  and  National  Resources 

The  "endless  caravan  of  ciphers,"  which  ex- 
presses the  annual  interest  on  debt  and  the  annual 
cost   of  military  expenditures,   represents  the  in- 

15  A  recent  study  of  Dr.  S.  Dumas  of  Paris  is  interest- 
ing in  this  connection.  Dr.  Dumas  shows  that  in  France, 
Germany,  Denmark  and  Austria,  the  death  rate  among  the 
people  at  home  is  12  to  25  per  cent  greater  in  time  of  war 
tJian  in  time  of  peace.  The  percentage  in  Austria  for  ex- 
ample rose  from  2.92  to  3.22  in  the  war  of  186(5,  in  France 
from  3.28  to  4.06  in  the  war  of  1871.  {The  Peace  Move- 
ment, Berne,  March  30,  1912.) 


WAR  EXPENDITURE  55 

terest  charges  yearly  on  a  capitalization  of  $100,- 
000,000,000.  This  amount,  of  which  the  entire 
earnings  are  devoted  to  past  and  future  war,  is 
just  a  little  less  than  the  estimated  value  of  all 
the  property  of  the  United  States  ($110,000,000,- 
000).  It  is  nearly  double  the  wealth  of  Great 
Britain  ($58,200,000,000),  practically  double 
that  of  France  ($50,800,000,000),  more  than 
double  that  of  Germany  ($48,000,000,000)  and 
three  times  that  assigned  to  Russia  ($35,000,- 
000,000).  It  is  equivalent  to  the  total  capital  of 
eight  states  like  Italy  ($13,000,000,000)  or  ten 
like  Japan  (about  $10,000,000,000).  Almost  the 
equivalent  of  the  total  estimated  wealth  of  Hol- 
land ($4,500,000,000)  is  expended  every  year 
for  military  purposes  in  times  of  peace  by  her  am- 
bitious and  reckless  neighbors.  The  greater 
wealth  of  Spain  ($5,400,000,000)  or  Belgium 
($6,800,000,000)  would  last  for  a  year  and  a 
half,  while  that  of  Portugal  (.$2,500,000,000) 
would  be  consumed  in  a  single  year  by  the  mili- 
tarism of  Europe  alone. ^^ 

The  entire  yearly  earnings  of  the  United  States 
in  all  wages  and  salaries  amount  to  $15,363,641,- 
778.  This  would  pay  the  military  bill  of  our 
country  for  thirty  years,  that  of  the  world  for 
nearly  four.  The  world  cost  of  war  for  a 
year  consumes  the  wages  (the  average  being 
$518)  of  8,000,000  American  workmen,  or  of 
3,300,000  Americans  who  work  for  salaries  (av- 
10  Bliss — Encyclopedia  of  Social  Reform,  p.  1279,  1906. 


56  UNSEEN  EMPIRE 

erage  being  $1,188).^^  A  similar  comparison 
for  Europe  would  almost  double  these  propor- 
tions. The  average  wealth  per  capita  of  the  in- 
dividual man  is  set  down  in  Europe  as  $727,  in 
America  as  $1,209.  The  results  of  the  life  work 
of  ten  average  men  will  pay  for  about  one  minute 
of  the  military  expenditure  of  the  world.  Now 
if  all  this  is  truly  necessary  to  the  peace  and  well- 
being  of  the  world  there  is  not  a  word  to  be  said 
against  it.  But  a  matter  of  such  gigantic  im- 
portance should  be  justified  by  very  careful  study 
and  very  complete  evidence. 

If  all  civilized  nations  could  be  placed  on  a 
peace  footing,  it  would  be  a  comparatively  easy 
matter  to  pay  off  the  national  debts.  The  sav- 
ings thus  achieved  would  make  a  new  world,  in 
which  poverty  need  not  exist  as  a  result  of  exter- 
nal social  or  economic  conditions,  but  solely  from 
causes  inherent  in  the  individual. 

War  Debt  as  a  Blessing 

A  hundred  years  ago  it  was  a  favorite  saying 
that  "a  national  debt  is  a  national  blessing."  In 
this  view  of  the  case  lies  a  double  fallacy.  On 
the  one  hand  national  borrowing  tends  constantly 
to  transfer  savings  from  the  common  man  to  the 
money  lenders.  On  the  other,  the  money  bor- 
rowed is  used  for  temporary  and  non-productive 
purposes.     When    the    "navies    melt    away,"    the 

17  Estimates  based  on  the  Reports  of  the  United  States 
Census  Bureau  for  1910. 


WAR  DEBT  AS  A  BLESSING  57 

money  and  the  effort  expended  on  them  vanish, 
leaving  the  nation  so  much  the  poorer,  as  the 
same  money  and  the  same  effort  might  all  have 
been  turned  into  productive  channels.  If  the 
government  presented  its  bonds  gratis  to  the 
money  lenders,  or  if  bonds  or  money  were  stolen 
outright,  the  nation  as  a  whole  would  be  none  the 
poorer.  It  would  be  a  transfer  of  wealth,  whether 
honestly  or  not,  within  the  confines  of  the  nation. 
As  matters  stand,  in  the  words  of  Professor  John- 
son: 

"The  money  raised  through  the  bond  issues 
serves  as  an  instrument  for  taking  men  who  would 
otherwise  be  engaged  in  productive  labor  away 
from  their  tasks  and  setting  them  at  the  useless 
occupation  of  dawdling  around  the  barracks.  It 
takes  capital  away  from  manufactures  and  trans- 
portation and  embodies  it  in  warships  that  fifteen 
years  hence  will  at  best  serve  as  targets  for  still 
more  formidable  warships  at  artillerj'^  practice. 
To  ignore  the  waste  of  war  debt  is  to  elevate  mili- 
tary expenditures  in  the  economic  sense  to  the 
rank  of  graft  and  common  theft — practices  which 
transfer  wealth,  but  do  not  destroy  it.  Mili- 
tarism steals  our  wealth  and  wantonly  burns  it  up 
or  sinks  it  in  a  bottomless  sea.  All  that  is  saved 
is  the  financiers'  commission  and  the  armourers' 
profit." 

Moreover,  the  idea  that  because  its  bonds  are 
held  within  its  own  boundaries,  a  nation  is  none 
the  poorer  for  its  debt,  involves  further  fallacy. 


58  UNSEEN  EMPIRE 

There  are  "empires  within  empires."  For  exam- 
ple, though  the  Rothschilds  in  London  are  re- 
corded as  English,  those  in  Paris  as  French,  those 
in  Berlin  as  German,  this  great  house  never  be- 
longed to  any  country.  It  existed  and  still  exists 
for  itself  alone.  So  with  all  other  great  syndi- 
cates of  finance.  These  groups  cannot  serve  two 
masters  equally.  They  naturally  serve  themselves 
first. 

Whether  the  gold  paid  out  in  interest  leaves 
the  country  or  not  has  no  significance,  so  long 
as  it  leaves  the  purses  of  the  taxpayers.  If  it 
leaves  the  country,  something  equivalent  has  been 
returned.  All  devices  of  the  spendthrift  nation, 
the  indirect  tax,  the  deferred  pa3'ment,  the  gov- 
ernment monopoly,  tend  to  divert  money  from  the 
pockets  of  the  common  man  to  the  vaults  of  the 
financiers.  A  million  little  streams  of  coin  unite 
to  form  a  great  river  of  gold,  controlled  by  the 
masters  of  finance.  The  common  man  may  waste 
his  money.  The  financier  knows  how  to  make  it 
work.  We  hear  of  great  investments  In  foreign 
lands  on  the  part  of  the  chief  nations  of  Europe. 
These  investments  do  not  (outside  of  France  ^^  at 
least)  represent  the  people's  savings.  They  rep- 
resent primarily  usury  on  war  loans,  profits  on 
armament  and  on  armament  loans,  voted  by  parlia- 
ments In  excess  of  fear  or  excess  of  "patriotism." 

18  France  is  a  country  of  small  investors.  The  influence 
they  individually  cannot  wield  is  exercised  by  an  oligarchy 
of  great  financial  establishments,  Le  Credit  Lyonnais,  La 
Society  Generale,  and  the  like. — (Albert  L.  Guerard.) 


THE  COST  OF  LIVING  59 

The  common  man,  the  farmer  and  the  workman 
have  no  stake  in  these  international  investments. 

The  Cost  of  Living 

Throushout  the  civilized  world  for  the  last  fif- 
teen  years  (since  1897)  there  has  been  a  steady 
increase  in  the  cost  of  living,  a  steady  fall  in  the 
purchasing  power  of  gold,  not  compensated  by  a 
corresponding  increase  in  wages  or  salaries. 
That  this  is  not  due  to  local  conditions  or  local 
legislation  is  evident,  for  it  affects  all  nations 
about  equally.  It  is  felt  in  the  same  way  in 
provincial  Austria  and  in  provincial  Japan,  as  I 
have  personally  observed.  To  this  rise  in  cost, 
there  are,  no  doubt,  many  contributing  causes, 
most  of  w^hich  I  need  not  discuss  here.  It  is,  how- 
ever certain  that  by  far  the  most  important  of 
these  arises  from  the  world-wide  increase  in  taxa- 
tion due  to  the  immense  increase  of  the  cost  of  war 
and  war  preparation.  Taxes,  the  world  over, 
bear  more  and  more  heavily  on  the  middle  men. 
Their  margin  of  profit  must  be  increased  at  the 
expense  of  others.  Th.e  producer  at  one  end  of 
the  series  and  the  consumer  at  the  other  bear 
the  increased  burden.  The  final  incidence  of 
taxation  falls  on  that  social  group  which  has  least 
power  to  raise  its  prices,  least  force  to  throw  off 
its  burdens  on  others. 

In  the  thoughtful  report  of  the  Massachusetts 
Commission  on  the  Cost  of  Living  in  1910,  the 
commissioners  find  the  most  important  element  to 


60  UNSEEN  EMPIRE 

be  "Militarism,  with  its  incidents  of  war  and 
waste  and  its  consequences  in  taxation." 

"The  three  great  wars  of  the  last  decade  and 
a  half — the  British-Boer,  the  Spanish-American, 
and  the  Russo-Japanese — took  millions  of  men  out 
of  the  productive  activities  of  our  civilization 
into  the  wasteful  activities  of  warfare,  diverted 
the  energies  of  other  millions  from  useful  in- 
dustry  in  shop  and  mill  and  farm,  and  trans- 
ferred their  skill  and  labor  to  the  production  of 
war  equipment,  material,  food  and  supplies  for 
the  armies  in  the  field.  This  diversion  of  labor 
and  capital  from  productive  industry  to  waste 
and  destruction,  with  the  accompanying  diminu- 
tion of  the  necessaries  of  life  and  an  inability 
to  suppl}^  the  world's  demands,  inevitably  resulted 
in  an  advance  of  the  prices  of  the  commodities 
of  common  consumption. 

"In  addition  to  these  conditions,  and  incidental 
to  them,  the  mania  for  militarism  leads  nations 
to  plunge  into  debt  in  order  to  create  and  main- 
tain armies  that  may  never  fight  and  navies  that 
may  never  fire  a  hostile  shot.  This  mania  has 
piled  up  huge  financial  burdens  in  England,  Ger- 
many, France,  and  other  foreign  countries,  for 
meeting  which  the  best  energies  of  their  states- 
men are  diverted  to  devise  new  methods  of  taxa- 
tion. In  the  United  States,  as  in  Europe,  the 
exactions  of  militarism  and  its  burdens  of  debt  are 
prime  factors  in  the  economic  waste  that 
has  produced  high  prices.     This  commission  does 


THE  COST  OF  LIVING  61 

not  care  to  discuss  the  philosophy  of  militarism. 
It  simply  desires  to  show  that  war  in  all  its  phases 
is  one  of  the  most  serious  influences  in  producing 
present  high  prices." 

One  result  of  the  increasing  cost  of  living  and 
the  narrowing  margin  of  the  wage  worker,  the 
world  over,  is  to  raise  "Social  Unrest"  to  the 
danger  point.  Bread  riots,  tax  riots,  virulent 
strikes,  "sabotage,"  "anti-patriotism"  and  to  a 
large  extent  Anarchism  and  Socialism  arise  in 
reaction  against  the  oppression  of  debt  and  waste. 
The  final  result  of  the  upheaval  of  social  forces 
no  one  can  prophesy. 

In  a  recent  German  cartoon,  the  prime  minister 
and  the  minister  of  foreign  affairs  are  pictured 
as  watching,  from  a  balcony,  the  gathering  of 
a  crowd  of  people  in  a  public  square.  "Sie 
schreien  Moroko !  Moroko  1"  (They  cry  Mo- 
rocco !  Morocco !)  says  the  prime  minister,  whose 
thoughts  are  on  matters  of  diplomacy.  "No," 
says  the  other,  "Sie  schreien  Brod !  Brod!" 
(They  cry  bread,  bread !) 

For  the  thoughts  of  the  people  were  not  on 
Imperial  Extension  in  Africa,  "the  Mirage  of  the 
Map."  They  were  interested  in  their  own  immedi- 
ate affairs,  the  prospect  of  escaping  starvation. 

"To  the  vast  majority  of  250,000,000  people, 
it  does  not  matter  two  straws  whether  Morocco 
or  some  vague  African  swamp  near  the  equator 
is  administered  by  German,  French,  Italian  or 
Turkish  officials."     (Norman  Angcll.) 


IV.     THE  CONTROL  OF  NATIONS 

The  financial  affairs  of  Europe,  and  these  in- 
clude all  questions  of  war  and  peace,  have  passed 
into  the  control  of  the  money-lenders. 

The  control  of  a  railway  system  does  not  neces- 
sitate ownership  but  simply  the  control  of  its 
debt  and  its  needs  at  critical  moments.  Just  so 
with  nations.  It  is  the  need  for  more  borrowings 
that  makes  the  old  loans  dominant.  In  propor- 
tion to  the  bulk  of  their  debts  and  the  acute  char- 
acter of  their  need  for  money  are  they  subject  to 
dictation.  The  ordinary  creditors  or  bondholders 
have  little  to  say.  It  is  the  necessity  for  further 
loans  which  places  control  in  the  hands  of  the 
financier.  This  may  be  exercised  quietly  as  befits 
the  business  of  the  banker,  but  it  is  none  the  less 
potent  and  real. 

"Dollar  Diplomacy" 

Barbarous  nations  have  no  debt.  With  the 
extension  of  enlightenment,  one  by  one  they  fall 
under  the  control  of  the  Unseen  Empire.  To  a 
mild  form  of  transition  has  been  recently  given 
the  name  of  "Dollar  Diplomacy."  The  essence  of 
"Dollar  Diplomacy"  is  the  conduct  of  the  foreign 
affairs  of  a  nation  in  such  a  way  as  to  favor 
the   financial    operations   of   its   bankers. 

In  general,  an  international  banking  company 

may  have  three  functions.      (1)  ordinary  banking, 

62 


"SPHERES  OF  INFLUENCE"  63 

that  is,  furnishing  free  money  to  "going  concerns" 
to  be  used  in  profitable  enterprise.  This  requires 
no  assistance  from  the  Government  and  the  many 
thousands  of  institutions  engaged  in  it  ask  only 
justice.  (2)  The  control  and  promotion  of  busi- 
ness enterprises.  In  so  far  as  these  are  legal, 
and  their  activities  extend  beyond  national  bound- 
aries, they  have  the  right  to  claim  the  assistance 
of  the  Consular  Service  in  the  same  degree  with 
any  other  industrial  undertaking.  Large  enter- 
prises have  no  greater  right  than  small  ones  to 
governmental  assistance.  (3)  "Pawnbroking"  ^ 
on  a  large  scale,  that  is,  the  placing  of  national 
loans. 

To  assist  in  the  adjustment  of  foreign  loans  is 
no  recognized  part  of  the  administration  of  a  re- 
public. It  is  claimed  in  behalf  of  the  new  "Dol- 
lar Diplomacy"  that  it  assists  in  bringing  to 
debtor  nations  "the  blessings  of  peace,  prosperity 
and  civilization."  But  this  phrase  with  its  as- 
sociate, "Spheres  of  Influence,"  covers  a  type  of 
operations  from  which  our  nation  has,  until 
lately  at  least,  as  a  matter  of  principle  stood  aloof. 

"Spheres  of  Influence;" (Persia) 

The  method  of  working  up  foreign  loans  known 
as  "Dollar  Diplomacy"  is  relatively  simple  and 
modest,  depending  not  on  force  but  on  friendly 
advice  and  the  suasion  of  opportunity.  The  con- 
ventional   European    method    of    arranging    such 

1  See  page  13,  "Banking  and  'Pawnbroking'." 


64  UNSEEN  EMPIRE 

affairs  is  by  means  of  the  extension  of  so-called 
"Spheres  of  Influence."  The  details  of  an  opera- 
tion of  this  kind  are  prophetically  given  by  a 
Persian  journal  {Hahlu'l-Matin,  September, 
1907^)  four  years  in  advance  of  the  actual  oc- 
currence. 

Referring  to  the  petty  revolt  of  Salaru'd 
Dawla,  a  futile  aspirant  to  the  throne  of  Persia, 
the  Matin  discusses  the  supposititious  comments 
of  the  Times  and  the  Standard  on  the  neces- 
sity as  expressed  by  them,  that  Russia  and  Eng- 
land should  cooperate  to  destroy  the  Pretender 
and  to  bring  peace  and  prosperity  to  Persia. 

"Since  the  disturbed  districts  were  nearer  to  Rus- 
sian territory,  troops  should  be  brought  from  Rus- 
sia, but  that  the  expenses  of  the  expedition  would  be 
equally  borne  by  the  two  Powers.  There  would  be 
a  vote  in  Parliament,  followed  by  a  correspondence 
with  St.  Petersburg.  The  troops  would  arrive. 
The  Salaru  would  be  taken  prisoner.  The  troops 
would  remain  for  some  time  in  the  district,  detained 
by  'restoring  order.'  The  expenses  of  all  these  pro- 
ceedings would  be  calculated,  and  would  be  found  to 
amount  to  about  five  million  pounds  sterling,  which 
would  have  to  be  recovered  from  the  Persian  treas- 
ury (just  as  in  China  they  demanded  the  expenses 
incurred  in  sending  troops  and  also  a  fine).  Well, 
the  Persian  treasury  would  practically  be  unable  to 
pay  this  sum,  so  it  would  be  found  necessary  that  an 
official  should  be  appointed  on  behalf  of  each  of  the 

2  As  quoted  by  Browne,  The  Persian  Revolution,  1910,  p. 
Ifil. 


"SPHERES  OF  INFLUENCE"  65 


two  Powers  to  increase  the  revenues  and  supervise 
expenditure,  and  that  the  Russian  official  should 
watch  over  the  North  of  Persia,  and  the  English  of- 
ficial over  the  South.  After  a  while  each  would  re- 
port to  his  Government  to  the  effect  that,  having  in 
view  the  destitution  of  Persia,  the  revenue  could 
not  be  increased,  and  that  the  payment  of  this  sum 
was  impossible;  and  that  in  some  way  or  other,  the 
condition  of  Persia  must  be  improved,  so  that  her 
revenues  might  be  enlarged.  Persia,  they  would 
add,  only  needed  certain  necessary  reforms  to  be- 
come more  prosperous.  Roads  and  means  of  commu- 
nication should  be  improved;  railways  were  needed  in 
certain  places ;  dams  must  be  constructed  to  increase 
agriculture;  the  erection  of  factories  was  greatly 
needed.  Finally,  after  prolonged  discussions,  it 
would  be  agreed  that  a  sum  of  at  least  twenty  mil- 
lion pounds  sterling  must  be  lent  conjointly  by  the 
two  Powers,  of  which  sum  part  should  be  spent  on 
irrigation,  part  on  roads,  part  on  mines,  part  for  ad- 
ministrative purposes,  and  so  on,  and  that  with  the 
remaining  two  millions  a  Bank  should  be  established. 
The  Persian  Government  would,  under  the  circum- 
stances, be  compelled  to  submit  to  these  conditions 
and  sign  the  required  bond,  comforted  by  the  assur- 
ance that  the  conditions  were  very  light  and  easy, 
and  comprised  no  more  than  ten  clauses,  that  the 
loan  would  cause  Persia  to  blossom  like  a  garden  of 
roses;  and  that  her  revenues  would  increase  ten- 
fold! 

"The  terms  of  the  new  loan  would  comprise  at 
least  two  clauses,  the  ratification  of  which  would 
close  forever  the  charter  of  our  independence.     .     .     . 

"One  of  these  conditions  would   be  that  the  offi- 


66  UNSEEN  EMPIRE 

cials  in  control  of  all  the  financial  departments  of 
the  Government  must  be  appointed  by  the  two  Pow- 
ers, and  that  they  in  turn  must  appoint  the  minor 
officials.  These  would  assume  control  over  all  the 
frontier  districts,  possibly  over  the  interior  also,  and 
would  impose  a  complete  check  on  the  functions  of 
the  home  officials.  We  need  not  remind  our  readers 
how  much  one  single  Belgian  official,  on  obtaining 
complete  control  of  the  Persian  Customs,  increased 
the  influence  of  foreigners,  or  how  he  caused  Persian 
employees  to  be  ignored  and  humiliated,  and  this 
notwithstanding  the  fact  that  we  were  able  to  dis- 
miss him  at  any  moment  we  pleased,  and  that  he  had 
no  sort  of  independent  authority  in  our  country. 
WTioever  has  examined  the  new  Customs  Tariff 
(drawn  up  by  him)  knows  of  what  treason  to 
our  country  this  ungrateful  wretch  was  guilty,  how 
he  increased  Russian  influence,  and  how  he  behaved 
toward  the  Persians.  Hence  it  will  be  evident  how 
the  Russian  and  English  officials,  enjoying  complete 
authority  and  unrestricted  power,  and  representing 
Persia's  creditors  are  likely  to  conduct  themselves. 
Moreover,  since  the  borrowed  capital  will  be 
under  their  own  control,  they  will  employ  it  in  such  a 
way  that  most  of  it  will  revert  to  their  own  countries. 
"Another  condition  will  be  that  all  concessions 
granted  by  Persia,  whether  internal  or  external,  must 
be  approved,  sanctioned  and  ratified  by  the  two  Pow- 
ers, Accordingly  a  Persian  subject  will  neither  be 
able  to  obtain  a  concession  for  the  manufacture  of 
paper  nor  to  set  up  a  factory,  since  the  granting  of 
all  such  concessions  will  be  in  the  hands  of  the  above- 
mentioned  functionaries,  who,  in  one  way  or  another, 
will  prefer  their  compatriots  to  us,  so  that  all  com- 


"SPHERES  OF  INFLUENCE"  67 


mercial  undertakings  will  pass  into  the  hands  of  Rus- 
sian and  English  merchants. 

"Another  condition  will  be  that  these  officials  shall 
receive  their  salaries  from  Persia,  who  will  recog- 
nize their  claims  and  rights,  and,  in  return  for  their 
services  to  their  Governments,  they  will  receive  a 
yearly  payment  in  cash  from  the  Persian  treas- 
ury.    .     .     . 

"Another  condition  will  be  that  all  the  material 
wealth  of  Persia  must  be  handed  over  to  guarantee 
the  debt.  This  stipulation  will  include  the  mines, 
coasts,  customs,  ports,  telegraphs  and  revenues,  and 
since  the  debt  must  be  paid  out  of  these  sources  of 
wealth,  and  the  Persians  do  not  know  how  to  manage 
them  or  put  them  to  profitable  use,  therefore  officials 
appointed  by  the  two  Powers  must  superintend  them 
and  take  such  steps  as  may  be  required  to  render 
them  productive.  The  Persian  Ministers  must  there- 
fore be  subordinated  to  these  foreign  officials,  whose 
commands  and  prohibitions  they  will  not  have  the 
slightest  right  to  disregard." 

The  late  Amir  of  Afghanistan,  Abdur  Rahman, 
is  quoted  as  saying  that  "Russia  is  like  the  ele- 
phant who  examines  a  spot  thoroughly  before  he 
places  his  foot  down  upon  it  and  when  once  he 
places  his  weight  there,  there  is  no  going  back 
and  no  taking  another  step  in  a  hurry  until  he 
has  put  his  whole  weight  on  the  first  foot  and 
smashed  everything  that  lies  under  it." 

In  general  the  course  of  military  pacification 
lies  along  the  lines  above  indicated.  The  presence 
of  alien  soldiers  breeds  chronic  disorder.     To  re- 


68  UNSEEN  EMPIRE 

lieve  this  requires  more  troops  and  more  money 
and  the  end  of  it  all  is  the  submergence  by  debt 
of  the  "pacified"  nation. 

The  present  condition  of  Persia  is  thus  summed 
up  in  the  following  paragraph : 

"Persia's  unexpectedly  setting  out  to  pay  off 
the  mortgage  and  rebuild  her  house  so  alarmed 
the  covetous  mortgagees  that  they  did  not  hesitate 
at  highway  robbery  to  keep  the  redemption  money 
from  being  paid."  (The  Nation,  N.  Y.,  Jan.  25, 
1911.) 

"The  allies  are  demanding  heavy  money  'in- 
demnities' which  they  will  take  good  care  to  make 
large  enough  to  preclude  the  possibility  of  their 
payment  without  recourse  to  a  large  foreign  loan. 
This  in  turn  will  be  furnished  the  unfortunate 
Persians  only  on  such  conditions  as  will  effectually 
mortgage  for  years  to  come  as  many  of  their  re- 
sources as  can  be  found  not  already  assigned  to 
foreign  syndicates.  The  Powers  will  do  their  best 
to  leave  no  money  for  future  Shusters  to  collect. 
The  Persians,  poor  wretches,  cannot  be  allowed 
to  govern  themselves  well  or  ill ;  they  are  mis- 
guided enough  to  live  in  a  country  possessed  of 
strategical  importance,  and  they  must  take  the 
consequences."  ^ 

"Continuity  of  Foreign  Policy" 

It  is  understood  that  the  recent  policy  of  Great 

3  Professor  Roland  G.  Usher— "The  Significance  of  the 
Persian    Question" — Atlantic    Monthly,    March,    1912. 


THE  MOROCCO  AFFAIR  69 

Britain,  as  exemplified  in  various  episodes  in  Asia 
and  Africa,  characterized  by  alternate  cringing 
and  bluster,  by  scrupulous  justice  and  studied 
injustice,  by  artificial  "ententes"  and  artificial 
enmities,  is  dominated  by  the  great  "law  of  con- 
tinuity of  foreign  policy."  In  other  words  a 
great  and  enlightened  nation  is  forced  to  live  down 
to  its  worst  lapses  in  international  courtesy  and 
moral  dignity.  The  ingenious  Mr.  Chesterton 
remarks:  "There  is  very  little  doubt  as  to  our 
national  vice.  An  acute  observer  of  Russia  says 
that  nation  lacks  the  cement  of  hypocrisy.  We 
do  not." 

Money  and  the  Morocco  Affair 

As  already  suggested,  the  influence  of  the 
"Unseen  Empire"  now  makes  for  peace  and  for 
solvency.  It  controls  and  creates  the  credit  of 
Europe.  It  will  not  connive  at  its  own  injury. 
It  is  said  that  the  Bank  of  England  has  a  "psy- 
chological reserve,"  which  guarantees  its  solvency 
in  every  crisis.  The  pride  of  England  is  involved 
in  its  maintenance.  To  default  its  pledges  would 
mean  the  collapse  of  credit.  The  great  bankers 
hold  similar  relations  to  the  Credit  of  Europe. 
War  is  a  disease  which  spreads  to  every  function 
of  the  nation.  While  the  bankers  might  make 
large  temporary  gains  through  reckless  dis- 
counts, in  the  long  run  they  would  be  the  losers 
through  the  disturbances  of  international  war. 
They   guard   the   solvency   of  the   world.     An   il- 


70  UNSEEN  EMPIRE 

lustration    of   their    influence   is   seen   in    the   late 
JNIorocco  affair. 

The  following  account  of  the  Morocco  trans- 
actions is  condensed  and  slightly  modified  from  an 
article  by  Francis  Delaisi.^ 

"At  the  end  of  August,  1911,  the  sharp  crisis  be- 
tween England  and  Germany  was  over.  The  under- 
standing between  Paris  and  London  made  war  impos- 
sible. There  was  no  other  course  but  to  make  an 
amiable  settlement  as  smoothly  as  possible.  The 
French  demand  was  for  (1)  a  political  protectorate 
over  Morocco,  that  is,  the  right  to  have  her  soldiers 
killed  there  and  to  spend  millions  in  order  to  main- 
tain regular  administration,  and  (2)  the  monopoly 
of  loans  for  the  public  M'orks  of  Maghreb.  This 
would  give  the  French  business  men  the  compensa- 
tion for  these  costs. 

"The  German  offer  was  that  of  economic  equality; 
whereby  the  Germans  would  participate  equally  in  all 
gains,  leaving  France  the  glory  of  possession  and 
the  expense.  Finally,  in  exchange  for  this,  they 
asked  all  of  French  Gabon  and  the  middle  Congo. 
According  to  the  familiar  illustration  of  Frederick 
II,  they  would  squeeze  the  orange,  taking  the  juice, 
leaving  the  rind  to  France. 

"Germany,  thanks  to  her  marvelous  commercial  de- 
velopment, is  growing  rapidly  rich.  Though  not 
poor,  she  has  not  3'et  the  great  capitalism  of  the  old 
nations  like  England  and  France.  In  her  industries 
she  needs  large  sums  for  short  periods,  and  for  these 
she  goes  to  the  most  abundant  market,  that  of 
Paris.     .     .     . 

*  "Financiers  centre  Diplomats,"  Echo  de  I'Ouest. 


THE  :\IOROCCO  AFFAIR  71 

"The  French  Banks  recognize  two  types  of  inter- 
national loan ;  consolidated  loans  on  long  periods  and 
advances  at  higher  rates  on  short  terms  ("titres  en 
pension"), 

"With  a  loan  of  25,  30  or  50  years  the  creditor  can 
in  no  case  try  to  collect  before  the  agreed  date. 
Thus,  for  example,  if  it  pleased  our  great  friend  the 
Czar,  the  morning  after  one  of  the  loans  of  1200 
millions  of  francs  which  he  makes  from  us  regularly 
every  four  years,  to  abandon  us  and  to  attach  him- 
self to  Germany,  we  should  have  nothing  to  say.  He 
could,  in  need,  declare  war,  and  use  to  fight  us  our 
own  millions.  If  we  wished  to  constrain  him  by 
force  of  arms  to  return  our  money,  we  should  only 
ruin  our  security.  Each  one  of  our  victories  would 
cut  down  the  value  of  our  bond. 

"The  German  demand  for  economic  reasons  is  for 
short  loans,  to  push  on  the  work  of  manufacture  and 
commerce.  Ordinarily  these  loans  are  granted  and 
renewed  as  needed.  But  if  trouble  arises  between 
the  republic  and  the  Kaiser  our  financiers  have  only 
to  give  the  sign  and  our  money  returns  to  our  own 
treasure  vaults.  Such  an  action  would  have  grave 
consequences  to  Germany.  Let  us  suppose  that  the 
French  bankers  recall  suddenly  the  700  or  800  mil- 
lions advanced  to  the  German  Bank.  The  rate  of 
discount  would  rise  at  once  from  4  per  cent  to  5,  6 
or  even  7  per  cent.  With  this,  current  industrial 
profits  would  be  swept  away. 

"This  is  a  powerful  weapon  which  M.  Dorizon 
bore  with  him  on  the  tenth  of  August,  1911,  when  he 
carried  in  his  pockets  a  counter-project  to  tliat  of  M. 
Kiderlen-Waechter.  If  the  imperial  chancellor  had 
held  out,  the   banker  could   let   loose   on   Germany   a 


72  UNSEEN  EMPIRE 

fearful  crisis  in  finance.  The  machinery  of  the 
"titres  en  pension/'  the  short  time  loan,  which  has 
been  figured  as  a  sort  of  betrayal  of  our  own  inter- 
ests, is  thus  transformed  into  a  terrible  weapon  as 
against  our  adversaries. 

"We  shall  see  how  our  financiers  have  known  how 
to  use  it,  and  how  by  its  use,  they  have  conquered 
the  arrogant  diplomacy  of  our  neighbors." 

Their  own  interests  not  being  in  jeopardy  we 
may  naturally  expect  the  money-lenders  to  be 
indifferent  to  questions  of  international  morals, 
and  ready  to  finance  either  side  alike.  The  safe 
limit  of  international  loans  being  reached,  as  in 
the  Russo-Japanese  war,  the  dawn  of  peace  is 
not  far  distant,  however  widely  variant  the  claims 
of  the  contending  parties. 

Money  and  the  Tripoli  Affair 

In  the  present  war  between  Turkey  and  Italy, 
it  is  recognized  that  both  nations  have  practically 
reached  the  limit  of  tax  exhaustion.  It  is 
claimed  that  the  "Unseen  Umpire"  has  declined  to 
make  any  further  loans  to  Italy.  The  last  loan 
granted  to  Turkey  involved  a  heavy  bonus,  some- 
thing like  17%  in  advance.  It  is  further  under- 
stood that  in  the  diplomacy  of  Europe,  Italy  has 
leave  to  take  her  share  in  Northern  Africa  at  her 
convenience.  Again,  it  is  believed  that  Tripoli 
would  be  acceptable  as  a  basis  of  further  loans. 
Presumably,  in  the  end,  Italy  will  receive  Tripoli, 
paying  a  certain  sum  in  exchange  to  the  creditors 


COST  OF  SMALL  MODERN  WAR      73 

of  Turkey.  All  this  is  hypothetical  and  uncer- 
tain, but  it  forms  a  working  theory  of  the  reasons 
why  this  war  has  been  permitted  by  those  who 
are  in  position  to  prevent  it.  It  is  claimed  that 
the  present  desultory  warfare  is  being  carried  on 
by  means  of  the  earnings  of  Italian  emigrants,  de- 
posited in  the  Banca  di  Italia. 

Cost  of  a  Small  Modern  War 

The  question  as  to  whether  it  will  all  pay  seems 
not  to  have  had  due  consideration  from  the  states- 
men of  Italy.  The  "mirage  of  the  map"  is  in  this 
region  especially  elusive.  While  actively  prose- 
cuted, the  war  is  estimated  to  have  cost  Italy  from 
four  hundred  thousand  to  a  million  dollars  per 
day.  These  sums  may  serve  to  expel  the  Turkish 
garrisons  from  the  coast  cities  of  Tripoli,  but 
the  conquest  of  the  Arab  tribes  of  the  desert  is 
another  matter.  Authorities  disagree  as  to  the 
amount  of  Tripoli's  foreign  trade.  Taking  the 
highest  estimate  as  to  its  exports  and  admitting 
a  generous  per  cent,  of  this  as  profit,  Italy's  gain 
from  a  year's  peaceful  occupation  of  Tripoli 
under  present  economic  conditions  would  scarcely 
pay  for  a  day  of  war.  And  even  such  pittance 
would  go,  not  to  Italy,  but  to  those  men,  Turks, 
Jews,  Italians  and  French,  who  might  chance  to 
control  the  export  trade.  Doubtless  under  bet- 
ter government  trade  would  increase.  Possibly 
under  favorable  conditions  the  profits  on  a  year's 
trade   might   be   made   to   cover   a   whole   month's 


74  UNSEEN  EMPIRE 

military  expenses.  But  all  Italy  will  get  is  the 
"mirage  of  the  map"  and  even  this  seems  to  waver 
a  bit.  Her  previous  melancholy  experience  in 
the  invasion  of  Abyssinia  will  be  repeated  in 
Tripoli,  and  this  whether  at  the  end  she  finds 
herself  victorious  or  not.  Whatever  the  moral 
questions  involved,  it  is  certainly  bad  economics 
for  a  nation  to  indulge  in  a  raid  the  cost  of  which 
far  exceeds  the  booty. 

Cost  of  Armageddon 

If  desultory  warfare  between  a  second-rate 
power  (really  become  third-rate  through  burden 
of  debt)  and  a  third-rate  power  (now  become 
fourth-rate)  is  so  expensive,  what  of  "God's  Test" 
of  the  nations  lightly  prophesied  by  certain  mili- 
tarists? ^ 

5  "At  the  present  epoch  in  the  world's  history  Mr. 
Carnegie  might  just  as  well  have  created  a  trust  for  the 
abolition  of  death.     .     .     . 

"The  real  Court,  the  only  Court  in  which  this  case  (Jap- 
anese immigration)  can  and  will  be  tried  is  the  Court  of 
God,  which  is  War.  The  Twentieth  Century  will  see  that 
trial,  and  in  the  issue,  which  may  be  long  in  the  balance, 
whichever  people  shall  have  in  it  the  greater  soul  of 
righteousness   will    be   the   victor.     .     .     . 

"Never  was  national  and  racial  feeling  stronger  on  earth 
than  now.  Never  was  the  preparation  of  war  so  tre- 
mendous and  so  sustained.  Never  was  striking  power  so 
swift  and  so  terribly  formidable.  What  is  manifest  now  is 
that  the  Anglo-Saxon  world,  with  all  its  appurtenant 
provinces  and  states,  is  in  the  most  direct  danger  of  over- 
throw final  and  complete,  owing  to  the  decay  of  its  mil- 
itary virtue  and  of  the  noble  qualities  upon  which  all 
military  virtue  is  built.     .     .     .     The  voice  of  every  God- 


COST  OF  ARMAGEDDON  75 

I  quote  below  from  a  Paris  correspondent  of 
the  American  Associated  Press  {San  Francisco 
Chronicle,  January  2,  1912).  Whether  the  de- 
tails are  wholly  correct  or  not  is  a  matter  of 
minor   importance. 

"Europe  is  preparing  for  war.  It  has  battalions, 
ships,  howitzers,  steel-clad  automobiles,  aeroplanes 
for  dropping  bombs  and  bombs  for  making  aeroplanes 
drop;  swords  to  cut  you  to  pieces  and  surgeons  to 
sew  you  up  again.  In  fact,  the  war  machine  is  fault- 
less. But  who  has  got  the  fuel  to  set  it  working? 
Who  will  plump  down  the  cash  for  war  between  Eng- 
land and  Germany,  and  for  the  resulting  Armageddon 
between  the  Triple  Alliance  and  the  Triple  Entente?" 

"Is  Herr  Bebel  right  when  he  says  the  coming 
Franco-German  war  will  cost  $750,000,000  a  month 
or  $9,000,000,000  a  year?  If  England,  Austria, 
Italy  and  Russia  join  in,  may  it  be  assumed  that  the 
war  will  cost  in  proportion — that  is,  $27,000,000,000 
for  the  first  year,  not  to  mention  the  second?  And 
who  will  pay  the  $27,000,000,000? 

"Europe's  brilliant  statesmen  waste  no  time  on  this 

fearing  man  should  be  raised  ...  to  revive  that  dying 
military  spirit  which  God  gave  to  our  race  that  it  might 
accomplish   His   will   on   earth.     .     .     . 

"The  Shadow  of  Conflict  and  of  displacement  greater 
than  any  which  mankind  has  known  since  Attila  and  his 
Huns  were  stayed  at  Chalons  is  visibly  impending  over  the 
world.  Almost  can  the  ear  of  imagination  hear  the  gath- 
ering of  the  legions  for  the  fiery  trial  of  peoples,  a  sound 
vast  as  the  trumpet  of  the  Lord  of  Hosts."— (Harold  F. 
Wyatt,  "God's  Test  by  War";  Mneteenth  Century,  April, 
1911.) 


76  UNSEEN  EMPIRE 


insignificant  problem.  They  are  far  too  busy  brew- 
ing those  glorious  wars — a  business  easier  far  than 
carrying  them  gloriously  on.  But  frivolous,  unpo- 
litical people — financiers,  economists,  statisticians, 
traders — would  like  to  know  who  will  pay? 

"First,  they  ask  themselves  what  will  a  war  cost? 
No  man  knows.  Herr  Bebel's  estimate  is  guesswork 
and  probably  exaggeration.  Italy's  little  war  with 
Turkey  is  costing  $100,000  a  day,  allowing  for  a 
mere  60,000  fighting  men.  Professor  Viviani  of 
Rome  says  that  if  only  80,000  men  are  sent  it  will 
cost  1,000,000,000  lire  or  $200,000,000.  Since  this 
estimate  was  made  it  appears  Italy  will  have  to  send 
120,000  men;  and  if  she  marches  into  the  interior, 
still  more.  The  Boer  war,  in  which  England's  army 
averaged  200,000,  cost  $1,055,000,000  in  two  and  a 
half  years.  The  Franco-German  war,  which  lasted 
only  190  days,  cost  Germany  $450,000,000  for  an 
average  fighting  force  of  1,250,000  men.  The  war  in 
the  Far  East  cost  Japan  $650,000,000  and  Russia 
$723,000,000,  not  counting  lost  ships.  Only  toward 
the  end  had  either  side  anything  like  a  million  men 
in  the  field. 

"The  coming  Armageddon  will  cost  infinitely  more 
than  these,  because  the  armies  in  the  field  will  be 
bigger  and  because  food,  clothes,  arms  and  ammuni- 
tion every  year  cost  more,  and  more  of  them  will  be 
wasted.  Moderate  estimates  are  that  a  war  lasting 
a  year  will  cost  France,  Germany  and  England  each 
about  $2,300,000,000.  Russia's  yearly  bill  would  be 
$2,800,000,000  and  Italy's  and  Austria's  about 
$1,400,000,000. 

"To  meet  such  demands  and  to  prevent  universal 
panic  no  single  European  state  has  made  proper  pro- 


COST  OF  ARMAGEDDON  77 


vision.  Europe's  war  chests  consist  mainly  of  Eu- 
rope's capacity  for  borrowing.  Germany  alone  has 
an  'Imperial  war  treasure/  which  has  captivated  the 
European  imagination,  but  in  reality  is  ridiculously 
small.  This  is  the  Reichskriegsschatz,  which  lies  in 
the  Julius  tower  of  Spandau  citadel,  guarded  by 
triple  steel  doors,  'simultaneous  keys'  which  are  held 
by  different  individuals,  and  a  dozen  sentries.  It 
amounts  to  a  beggarly  $30,000,000,  all  in  coined  ten 
and  twenty  mark  pieces,  kept  in  boxes,  each  of  which 
contains  $25,000.  Against  it  are  issued  $30,000,000 
in  imperial  treasury  notes,  so  that  no  interest  is 
lost. 

"Germany's  real  war  asset  is  her  state  railroad  sys- 
tem. No  country  has  such  a  splendid  asset.  The 
Prussian  railroads,  which  cost  $2,250,000,000,  are 
now  valued  at  $4,500,000,000.  They  pay  an  average 
of  7  per  cent  on  the  invested  capital.  The  result  is 
that  only  $1,500,000,000  railroad  debt  is  outstanding, 
so  that  the  state  owns  railroad  property  which  has  a 
sale  or  mortgage  value  of  $3,000,000,000  clear  of 
debt.  The  South  German  state  railroads  are  not  so 
remunerative,  but  they  could  be  mortgaged  for  a  con- 
siderable sum,  and  optimists  have  declared  that  on 
her  state  property  Germany,  if  need  be,  could  secure 
loans  totalling  approximately  $1,300,000,000. 

"Russia  is  the  only  other  state  that  can  talk  of 
realizable  assets  in  terms  of  hundreds  of  millions  of 
dollars.  First  comes  the  $495,000,000  gold  reserve 
which  lies  in  the  cellars  of  the  Bank  of  State. 
Against  it  are  issued  $610,000,000  in  credit  notes, 
and  about  $400,000,000  more  in  credit  notes  could  be 
issued  in  war  time  witliout  exceeding  the  legal  limit. 
That  is  one  asset.     The  29,000  miles  of  state  rail- 


78  UNSEEN  EMPIRE 


ways  cannot  be  counted  an  asset  because  they  show 
an  annual  deficit  of  $10,000,000.  The  greatest  Rus- 
sian asset  is  the  'State  Vodka  Monopoly,'  which  was 
started  as  an  experiment  by  Witte  in  1895,  and  is 
now  in  force  all  over  the  empire.  Under  it  the  state 
is  the  sole  manufacturer,  wholesale  and  retail  liquor 
dealer.  The  monopoly  has  tended  finally  to  demoral- 
ize the  muzhik,  but  as  a  financial  measure,  it  has  been 
a  brilliant  success.  It  yields  an  annual  profit  of 
about  $225,000,000  and  has  a  capital  sale  value  of 
about  $4,000,000,000. 

"At  first  sight,  England  and  France,  Europe's  rich- 
est two  states,  are  far  worse  off  than  relatively  poor 
Germany  and  very  poor  Russia.  They  have  prac- 
tically no  assets.  France  has  only  the  tobacco,  match 
and  powder  monopolies,  and  England  has  her  posts, 
but  neither  can  produce  an  asset  like  the  Prussian 
state  railroads  and  the  Russian  drink  monopoly.  Yet 
the  national  credit  of  England  and  France  is  more 
valuable  than  these  two  put  together.  Considering 
the  far  lower  interest,  English  Government  stocks  are 
quoted  much  higher  than  German.  England's  credit, 
even  during  war,  is  better  than  Germany's  during 
peace.  In  March,  1900,  England  issued  at  98^  a 
2f  per  cent  Boer  war  loan  of  $150,000,000.  It  was 
subscribed  eleven  times  over.  In  the  same  month 
Bavaria  appealed  for  a  mere  $10,500,000.  For  this 
she  had  to  consent  to  interest  at  3^^  per  cent  and  an 
issue  price  of  93^.  The  late  Sir  Robert  Giffen  said 
that  on  emergency  England  could  appeal  for  $500,- 
000,000  at  8  in  the  morning  and  have  it  at  8  o'clock 
at  night.  The  credit  of  England  and  France  is  based 
on  their  national  wealth  and  accumulations  of  capi- 
tal. 


COST  OF  ARMAGEDDON  79 


"When  war  breaks  out  this  laying  hands  on  sav- 
ings will  be  the  immediate  unromantic  occupation  of 
the  brilliant  statesmen  who  have  brought  it  about. 
The  first  steps  will  be  to  transform  the  state  banks 
into  war-banks,  and  to  proclaim  le  cours  force — that 
is,  that  Government  issues  must  be  accepted  at  their 
nominal  values.  In  Germany  in  time  of  peace,  the 
issues  of  the  'Reichsbank'  may  be  rejected  and  gold 
demanded.  A  second  war  measure  will  be  to  suspend 
the  periodical  publication  of  the  level  of  the  state 
banks'  gold  stock.  This  also  was  done  by  France  in 
1870.  The  economist  Stroell  holds  that  Governments 
will  further  finance  war  by  issuing  'forced  paper,' 
without  any  gold  backing,  thus  keeping  their  gold  re- 
serves intact.  The  only  security  for  such  paper 
would  be  the  Government's  credit.  But  England  and 
France  are  ahead  in  both  the  conditions  of  their  stock 
exchanges  and  of  their  savings  banks.  The  German 
savings  banks  are  weak  because  their  money  is  largely 
invested  on  mortgage  and  cannot  be  quickly  realized 
in  case  of  panic. 

"Looked  at  from  the  money  point  of  view,  the  Eu- 
ropean Armageddon  is  not  at  all  the  obvious,  simple 
thing  which  people  imagine.  It  is  a  complex,  men- 
acing question,  full  of  disagreeable  surprises  and 
treacherous  pitfalls,  and  it  promises  the  ruin  of  at 
least  some,  if  not  all,  the  states  which  rush  into  it 
lightheartedly.  But  Europe's  brilliant  diplomatists 
do  not  worry  themselves  about  such  contingencies. 
What  with  diplomatists,  statesmen,  shipbuilders  and 
gun  makers — not  to  mention  The  Hague  arbitration 
judges  and  the  bloody-minded  peace  societies — all 
trying  to  bring  about  a  war,  a  war  is  some  day  inevi- 
table.    But  who  will  pay  the  piper.''" 


80  UNSEEN  EMPIRE 

Nevertheless,  however  big  the  war  cloud,  the 
storm  will  pass  over.  We  may  be  sure,  to  use 
Mr.  Powell's  words,  that  "there  will  be  no  war 
until  the  real  rulers  of  Europe  from  their  strong- 
holds in  Lombard  Street  and  the  Rue  Quatre- 
Septembre,  in  the  Burgstrasse  and  the  Schotten- 
ring  themselves  tell  the  fighters  to  fight." 

Interest  of  "High  Finance" 

In  the  London  Nation  (January  21,  1912) 
occurs  the  following: 

"Fortunately  it  is  to  the  interest  of  la  haute 
finance  that  France  and  Germany  should  live  in 
peace.  Indeed  the  last  thing  that  the  financiers 
desire  is  a  European  war.  The  advantages  of 
adventures  in  Asia  or  Africa  may  lead  them  to 
endanger  the  peace  of  Europe,  but  they  always 
think  that  they  can  prevent  the  danger  of  war 
from  becoming  a  reality  and,  in  fact,  they  did 
so  in  the  recent  crisis.  For  the  present  they  will 
be  content,  no  doubt,  with  the  advantages  al- 
ready secured,  and  we  are  not  likely  to  have  a 
repetition  of  the  Moroccan  venture." 

The  present  relation  of  international  finance  to 
international  war  is  thus  convincingly  presented 
by  the  New  York  Tribune: 

"On  more  than  one  occasion  in  recent  years  we 
have  been  able  to  discern  unmistakable  indications  of 
the  sway  of  .  .  .  'the  unseen  empire  of  finance' 
in  international  affairs,  and  particularly  in  the  avert- 


INTEREST  OF  "HIGH  FINANCE"     81 


ing  of  wars  and  in  the  promotion  of  friendly  relations 
among  the  powers. 

"From  one  theoretical  point  of  view  that  is,  of 
course,  to  be  much  deplored  and  disapproved.  The 
nominal  rulers  of  a  land  should  be  also  its  actual 
rulers.  The  exercise  of  control  by  an  irresponsible 
'power  behind  the  throne'  is  too  susceptible  of  abuse 
to  be  approved.  Yet  in  practice,  by  the  very  show- 
ing of  its  critics,  this  system  has  had  certain  good  re- 
sults. It  has  consistently  made  for  peace.  That  is 
indisputable.  Nobody  has  ever  heard  a  hint  that  the 
Rothschilds  were  trying  to  bring  on  a  war.  Their 
influence  has  always  been  for  peace,  for  the  very 
practical  reason  that  in  peace  lie  their  security  and 
their  profits.  There  is  abundant  reason  for  the  be- 
lief that  on  several  occasions  this  money  power  has 
been  the  chief  barrier  between  Europe  and  a  devas- 
tating war.  To  that  extent,  therefore,  the  rule  of 
this  'unseen  empire'  must  be  regarded  with  approval. 

"There  is,  however,  a  paradox  involved  in  the  case, 
in  the  circumstance  that  the  moneys  lent  by  these 
capitalists  to  the  governments  are  used  largely  for 
military  purposes.  They  are,  in  fact,  potential  war 
loans,  made  by  those  who  desire  the  keeping  of  the 
peace.  Capitalists  do  not  hesitate  to  advance  money 
for  naval  construction  or  for  army  enlargement.  In- 
deed, there  have  at  times  been  suspicions  that  they 
were  using  their  influence  in  favor  of  the  making  of 
large  appropriations  for  such  purposes,  which  would 
necessitate  the  issuing  of  loans.  And  then,  after  the 
loans  are  made,  they  exert  their  influence  to  prevent 
the  fulfilment  of  their  intended  uses.  It  is  an  inter- 
esting subject  of  speculation  whether  the  influence  of 
the  provisions  which  are  made  by  the  loans,  or  of  the 


82  UNSEEN  EMPIRE 

makers  of  the  loans,  will  in  the  end  prove  the  more 
powerful." 

Norman  Angell  *"  shows  the  growing  inter- 
dependence of  nations  to  be  such  that  even  a  policy 
like  Bismarck's  could  not  bring  on  war  between 
Germany  and  France. 

"Where  Germany  could  have  'bled  France 
white'  with  a  certain  satisfaction  without  any  im- 
mediate damage  being  involved  to  his  own  coun- 
try, Herr  von  Kiderlen-Wiichter  (I  am  told  to 
his  surprise),  learned  that  to  'bleed  white'  this 
relatively  feeble  France  of  1911,  would  be  to 
plunge  this  great  and  powerful  Germany  into  the 
direst  economic  distress.  .  .  .  The  very 
threat  of  it  was  enough.  ...  I  could  trace 
for  you  a  really  humorous  chart  establishing  the 
direct  relationship  between  the  vigor  of  German 
foreign  policy  and  the  figures  of  German  com- 
mercial insolvency." 

The  experience  of  the  world  shows  that  no  na- 
tion can  have  at  once  a  great  army,  a  great  navy, 
a  great  debt,  a  vigorous  foreign  policy  and  the 
prosperity  of  its  citizens.  Two  of  these  it  may 
have  and  sometimes  three,  but  never  all  five  at 
once. 

In  another  article,^  the  writer  above  quoted  re- 
fers to  the  solidarity  of  industrial  and  commercial 
interests  as  illustrated  by  the  international  rela- 

«  Public  Opinion,  February  2,  1912. 
7  Public  Opinion,  January  26,  1912. 


WAR  AND  BANKING  83 

tions  of  the  bankers  of  the  world.  He  asserts 
that  "banking  all  unconsciously  is  bringing  peace 
to  the  world  by  making  nations  financially  inter- 
dependent :  that  the  material  side  of  wealth  as  rep- 
resented by  banking  makes  for  and  not  against 
a  better  human  society  and  the  higher  welfare  of 
the  race ;  that  the  world's  granary  will  have 
enough  to  spare  for  all  mankind  when  men  and 
women  work  together  for  mutual  good." 

War  and  Modern  Banking 

Some  time  since  Lord  Roseber}^  noting  the 
movement  in  society  from  personal  and  arbitrary 
rule,  said  that  "royalty  is  no  longer  a  political 
but  a  social  function."  A  change  similar  in  char- 
acter has  modified  the  nature  of  banking.  Bank- 
ing  is  becoming  not  a  political  but  a  social  func- 
tion. Many  of  the  misfortunes  of  Europe  have 
been  ascribed  to  the  early  alliances  between  poli- 
tics and  banking.^  That  alliance  is  being  dis- 
solved. Banking,  as  well  as  government,  is  under 
the  growing  influence  of  democracy  and  cosmo- 
politanism. While  "pawnbroking"  on  a  large 
scale  still  concerns  itself  with  affairs  of  derelict, 
inchoate  or  helpless  nations,  and  is  therefore  still 

8  For  the  most  part  "it  is  not  the  banker  who  wants  to 
interfere  with  politics.  It  is  the  politician  who  wants  to 
interfere  with  banking.  All  that  the  banker  generally  asks 
of  politics  is  to  be  left  alone."  .  .  .  "Separate  even  the 
most  powerful  of  these  'sinister  figures'  (of  the  interna- 
tional financier)  from  the  interests  or  the  economic  forces 
of  which  at  the  moment  he  may  be  the  representative  and 
he  is  reduced  to  practical  impotence."     (Norman  Angell.) 


84  UNSEEN  EMPIRE 

allied  with  politics,  the  spread  of  common  banking 
causes  it  in  a  way  to  become  the  nervous  system 
of  society,  its  protection  against  economic  harm. 
Norman  Angell  ®  has  clearly  shown  that  in  pub- 
He  affairs  the  banker  is  the  first  to  feel  the  symp- 
toms of  disorder.  War  is  sickness  in  the  eco- 
nomic as  well  as  in  the  social  organism,  and  the  in- 
fluence of  sound  banking  is  everywhere  and  auto- 
matically opposed  to  it.  To  the  modern  banker, 
as  to  Benjamin  Franklin,  "there  never  was  a  good 
war  nor  a  bad  peace."  "Destruction  of  capital, 
in  the  nature  of  things,  never  appeals  to  a 
banker."  ^^ 

The  influence  of  finance  now  lies,  not  in  spectac- 
ular provision  of  great  loans,  but  in  "the  unno- 
ticed impersonal  forces  which  the  ordinary  week- 
day humdrum  work  of  banking  has  called  into  ex- 
istence, the  cumulative  outcome  of  those  number- 
less every-day  operations  that  take  place  almost 
completely  outside  the  control  of  Governments  and 
of   financiers,    often    unknown    to    them,    often    in 

»  "If  we  can  imagine  an  animal  that  did  not  feel  hun- 
ger or  cold  or  the  bad  taste  of  poisons,  it  would  very  soon 
be  wiped  out.  It  has  nothing  to  guide  it  in  its  adaptation 
to  its  environment,  none  of  the  acute  promptings  which  re- 
sult in  placing  it  in  the  most  favorable  conditions  to  allow 
the  unconscious  and  uncontrollable  processes  to  be  carried 
on  favorably.  Now,  banking  is  performing,  among  other 
functions,  this  immense  service  to  the  economic  and  social 
organism;  it  is  providing  it  with  sensory  nerves  by  which 
damage  to  any  part  or  to  any  function  can  be  felt,  and 
thanks  to  such  feeling,  avoided."  (Influence,  of  Banking 
upon   International   Relations:    Norman    Angell,    1912.) 

10  Isaac   N.   Seligman. 


WAR  AND  BANKING  85 

spite  of  them,  representing  forces  far  too  strong 
and  far  too  elusive  for  such  control,  so  much  a 
part  of  the  warp  and  woof  of  the  ordinary  life  of 
the  world  that  they  are  rapidly  and  surely  weav- 
ing society  into  one  indissoluble  whole."  ^^ 

According  to  Mr.  Isaac  N.  Seligman,^^  "the 
Russo-Japanese  conflict  of  190-1-5  was  halted  in 
large  measure  because  bankers  refused  to  float 
further  loans  at  anything  like  ordinary  terms 
after  probably  $1,500,000,000  had  been  wasted  in 
that  contest.  The  interests  of  commerce  have 
thus  put  into  the  hands  of  international  bankers 
a  powerful  weapon  to  use  in  the  interests  of  con- 
ciliation and  peace."  Mr.  James  Spe^'er  has  pro- 
posed that  this  weapon  be  formally  adopted  and 
consistently  used  against  those  nations  who  may 
try  to  disturb  the  peace  of  the  world  by  making 
war,  as  all  war  must  be  made,  on  borrowed  money. 

"If  by  withholding  the  'sinews  of  war'  the 
banker  can  force  a  nation  to  desist  from  war,  he 
conserves  to  its  people  the  enormous  sums  which 
would  have  been  wasted"  (Seligman). 

Banking  is  the  democratic  phase  of  what  un- 
der autocratic  rule  is  pawnbroking.  In  common 
with  other  influences  of  democracy  banking  makes 
for  peace.  It  is  a  function  of  peaceful  industry 
as  pawnbroking  is  of  war.  "A  king  without 
money  is  like  a  spear  without  a  head." 

11  Norman   Angell. 

12  International  Banking  and  International  Unity  Concilia- 
tion Society,  No.  50.  191i 


V.     SEA  POWER 

In  this  chapter  is  given  an  account  of  "Sea 
Power"  in  its  relation  to  national  affairs.  It  is 
the  most  costly  element  in  the  business  of  govern- 
ment. The  very  name  has  in  itself  a  magic  which 
unlocks  the  strong  boxes  of  the  world. 

Armament  Competition 

The    present    status    of    "Sea    Power"    is    thus 
graphically   summed   up  ^   by   Professor  William 

I.  Hull: 

"Each  nation  argues  that  it  can  protect  its  own 
peace  only  or  best  by  increasing  its  armaments;  and 
accordingly  each  of  the  circle  of  forty-odd  nations  is 
feverishly  engaged  in  the  edifying  task  of  out-arm- 
ing, to  the  best  of  its  abilities,  each  of  the  others. 
Great  Britain,  assured  that  her  own  peace  and  the 
peace  of  the  world  is  threatened  by  the  menace  of  the 
Teuton,  lays  down  the  keels  of  two  dreadnaughts ; 
Germany,  perceiving  the  portentous  shadow  of  the  ad- 
vancing Briton,  lays  down  the  keels  of  two  super- 
dreadnaughts.  This  gives  to  Great  Britain  a  realiz- 
ing sense  of  the  inadequacy  of  her  twenty-eight  miles 
of  warships,  and  in  order  to  avoid  another  panic  such 
as  the  German  super-dreadnaughts  caused  her,  she  in- 
creases her  per  capita  naval  expenditures  within  ten 
years  by  43  per  cent.;  Germany  'goes  her  several  bet- 
ter,' and  increases  her  per  capita  naval  expenditures 

1  The  World's  Two  Vicious  Circles:  Advocate  of  Peace, 
December,  1911. 

86 


PURPOSES  OF  SEA  POWER  87 


within  ten  years  by  119  per  cent.  Some  American 
'statesmen  dream  of  the  menace  of  Germany  in  South 
America  or  Japan  upon  the  Pacific,  and  the  United 
States,  frightened  by  such  nightmares,  increases  its 
per  capita  naval  expenditures  within  ten  years  by  64 
per  cent.  Japan,  emulating  its  Occidental  school 
teachers  in  their  fallacious  logic,  and  postulating  the 
impossibility  of  having  too  much  of  a  good  thing,  in- 
creases its  per  capita  naval  expenditures  within  ten 
years  by  137  per  cent.  The  other  four  'great  Pow- 
ers,' caught  up  in  the  same  frenzy  of  fallacious  logic 
and  futile  competition,  convert  their  national  re- 
sources into  dreadnaughts,  and  all  eight  together  ex- 
pend upon  their  navies  within  ten  years  the  almost 
unimaginable  sum  of  $5,600,000,000  !  ^ 

"Thus  the  vicious  circle  is  formed;  the  small  mem- 
bers of  the  family  of  nations  join  in  the  frenzied 
competition  for  big,  bigger,  biggest  armaments,  and, 
like  the  serpents  of  an  African  jungle,  each  strug- 
gles and  strains  to  raise  its  head  high  above  the  oth- 
ers. But  how  much  like  a  will-o'-the-wisp  is  the 
peace  based  upon  such  a  chain  of  reasoning  is  shown 
by  the  continually  precarious  and  fragile  character 
of  that  peace,  while  above  it  broods  the  shadow  of  a 
menacing  Armageddon  unrivalled  in  history  or  proph- 
ecy." 

Purposes  of  Sea  Power 

The  end  of  almost  half  the  military  expendi- 
tures of  the  world  is  to  develop  "sea  power." 
For  this,  nearly  every  sea-faring  nation,  great 
or  small,  spends  more  than  the  cost  of  all  its  civil 

2  Fig^ures  from  the  British  Admiralty's  "WTiite  Paper" 
of  October.  1911. 


88  UNSEEN  EMPIRE 

equipment,  lavish  as  this  sometimes  is.  And  yet 
the  function  of  "sea  power"  is  most  vaguely  un- 
derstood by  the  people  who  pay  for  it.  Seven 
reasons  are  variously  given  for  its  maintenance: 

(1)  National  defense,  (2)  maintenance  of 
peace,  (3)  protection  of  commerce  from  pirates 
and  belligerents,  (-i)  circumventing  of  other  na- 
tions, (5)  protection  or  subjugation  of  alien  de- 
pendencies, (6)  ceremonial  purposes,  and  (7) 
"Control  of  the  Sea." 

(1)  So  far  as  the  United  States  is  concerned, 
the  first  item,  that  of  national  defense,  may  be 
regarded  as  negligible,  as  fortified  towns  with 
their  torpedo  boats,  mines  and  16-inch  shore-guns 
are  impregnable  to  battle-ships,  unfortified  towns 
under  the  laws  of  war  are  now  immune  from  bom- 
bardment, and  no  modern  army  can  subsist  in 
a  hostile  land  without  a  tremendous  train  in  the 
way  of  supplies.  Since  Napoleon's  time,  no  army 
has  lived  on  the  enemy's  country.  Neither  does 
the  battle-ship  any  longer  ravage  the  coast,  burn- 
ing villages  or  robbing  farmers.  It  is  far  too 
costly  a  tool  for  such  use.  A  battle-ship  has 
equipment  for  about  an  hour's  warfare  with  an 
enemy  of  its  own  grade.  Broadly  speaking,  one 
may  say  that  after  an  hour's  actual  fighting  those 
ships  which  are  not  victorious  are  captured,  sunk 
or  fled.  The  great  sea-fight  off  Tsushima  was 
settled  in  twenty  minutes. 

The    defense    of   England    on   the   other    hand, 
depends  primarily  on  her  navy.     She  cannot  feed 


PURPOSES  OF  SEA  POWER  89 

herself  and  looks  to  other  nations  for  bread. 
But  her  navy  is  how  swollen  far  beyond  reason 
and  so  becomes  in  a  degree  a  menace  to  world 
peace. 

If  we  consider  naval  expenditures  as  "insur- 
ance" whether  on  land  or  sea,  the  rates  are  far 
too  high.  The  "risk,"  such  as  it  is,  applies 
only  to  seaboard  property  and  to  very  little  of 
that.  For  the  most  part  such  insurance  is 
wholly  needless  for  reasons  elsewhere  given.^ 
Further  it  fails  of  its  purpose  because  it  does  not 
reduce  the  risk.  The  more  numerous  the  engines 
of  war,  the  greater  the  chance  of  collision,  except 
as  held  in  check  by  the  operations  of  bankers. 

(2)  The  second  item,  the  maintenance  of 
peace,  we  may  neglect  as  a  figure  of  speech. 
"Sea  power"  makes  for  peace  through  awe  or 
through  exhaustion.  The  first  of  these  keeps  the 
little  nations  quiet.  The  second  places  war  out 
of  reach  of  the  large  ones,  a  matter  which  is  dis- 
cussed further  on.^ 

(3)  The  third  item,  the  protection  of  com- 
merce, has  but  limited  range  of  value.  In  all  nor- 
mal conditions  commerce  is  wholly  independent 
of  naval  operations.  The  trade  of  great  nations 
is,  for  the  most  part,  not  with  their  dependencies 
but  with  their  equals.  The  commerce  of  Norway 
and  Holland,  without  sea  power,  is  greater  per 
capita  and  greater  in  relation  to  national  wealth 

3  See  page  159. 
*  See  page  93. 


90  UNSEEN  EMPIRE 

than  that  of  Great  Britain  or  Germany.  Even 
the  trade  of  Switzerland  stands  in  proportion, 
it  is  claimed,  above  that  of  the  great  sea-faring 
nations.  Exploitation  is  not  trade.  In  the  con- 
trol of  colonies,  the  idea  of  spoliation  must  be 
given  up  before  commerce  begins. 

(4)  The  fourth  reason,  the  circumventing  of 
other  nations,  involves  the  old  fallacy  that  each 
nation  is  an  individual,  mean  and  grasping, 
ready  at  any  instant  to  pounce  on  its  unprepared 
neighbors.  This  Pierre  Loti  calls  the  "hyena" 
idea.  Nations,  however,  are  groups  composed  of 
men  each  intent  on  his  own  affairs,  and  wholly 
opposed  to  collective  action  which  shall  interfere 
with  these.  The  "hyena"  spirit  sometimes  ap- 
pears in  antiquated  diplomacy,  in  reckless  jour- 
nalism or  in  the  belated  utterances  of  case-hard- 
ened war-makers,^  (who  have  never  fought  a  bat- 
tle), but  not  often  in  the  actual  interrela- 
tions of  modern  states.  Commerce  in  civilized 
nations  is  a  mutual  affair,  and  in  every  cargo  that 
crosses  the  ocean  many  nationalities  have  a  stake. 
The  moneyed  interests  of  every  civilized  nation  are 
to-day  bound  up  with  those  of  every  other. 

(5)  As  regards  the  fifth  reason,  the  protec- 
tion or  subjugation  of  alien  dependencies,  the 
navy  can  do  little  more  than  to  serve  as  a  convoy 
for  transport  ships.  In  time  of  peace  this  serv- 
ice is  scarcely  needed.     To  accomplish  it  in  any 

5  For  example,  see  General  von  Bernhardi's  Deutschlund 
und  der  nachste  Krieg. 


PURPOSES  OF  SEA  POWER  91 

event  would  require  neither  large  vessels  nor  many 
of  them.  If  it  means  a  great  fleet,  the  game 
is  not  worth  the  candle.  Some  of  England's 
wisest  have  doubted  whether  it  is  ever  worth 
while.  Others  have  called  it  the  "White  Man's 
Burden." 

We  may  note  further  that  actual  war  is  con- 
ducted in  the  main  by  armies.  Ships  cannot 
fight  armies,  even  as  "a  herd  of  whales  cannot 
fight  a  herd  of  elephants." 

(6)  The  sixth  reason,  that  of  ceremonial 
needs,  is  one  not  often  emphasized,  but  it  is  ob- 
vious that  great  navies  exist  largely  for  giant 
decoration.  It  is  said  that  167  vessels  took  part 
in  the  late  Coronation  of  King  George  V.  Only 
one  of  these  had  seen  service,  and  that  was  of 
little  importance. 

The  same  spirit  which  led  the  Emperor  of  Ger- 
many to  add  to  his  honors  the  title  of  "Admiral 
of  the  Atlantic"  is  involved  in  every  movement 
for  naval  extension.  The  love  of  national  dis- 
play, peculiar  to  no  one  nation,  finds  satisfaction 
in  naval  parades.  In  America  our  biggest  ships, 
however  well  constructed  and  however  skilfully 
managed,  are  valued  largely  by  the  people  as 
a  decoration.  We  must  not  forget,  however,  that 
engines  of  destruction  were  built  for  use;  they 
tend  always  to  achieve  their  normal  function,  they 
are  at  once  costly  and  dangerous  beyond  all  other 
toys. 

Some  time  since,  Norway  celebrated  at  Bergen 


92  UNSEEN  EMPIRE 

the  anniversary  of  the  birthday  of  the  great 
naturalist,  Michel  Sars,  From  the  Imperial 
University  of  Tokyo  came  an  eminent  Japanese 
scholar  to  do  honor  to  his  colleague.  At  Bergen 
lay  the  little  Norwegian  fleet  of  battle-ships. 
Some  one  remarked  that,  compared  with  the  fine 
navy  of  Japan,  the  guest  must  look  down  on 
this  paltry  fleet. 

"No,"  said  he,  "the  reproach  of  Japan  is  that 
she  has  a  great  navy  with  no  Michel  Sars  whose 
birthday  she  can  celebrate." 

(7)      The   seventh   reason  assigned,  the  "Con- 
trol of  the  Sea,"  rests  on  an  outworn  anachron- 
ism.     In    1493    Pope    Alexander   VI    divided    the 
ocean  between   the   two   great   sea-faring  nations 
of  the  day,  Portugal   taking  control  of  all  east 
of  about  the  fiftieth  meridian,  Spain  of  all  that 
lay  to  the  west.     This  gave  to  Portugal  Africa 
and  Brazil  and  to  Spain  the  rest  of  the  tropical 
world.     But  in  our  day  no  nations  control  the  sea. 
All   governmental   authority   stops   at   the   three- 
mile   limit.      The   open   sea   is   a  highway   for   all 
peoples  alike.     In  time  of  war,  under  the  present 
antiquated    code,   navigation    may   be   a   bit   dan- 
gerous to  merchant  vessels  of  belligerent  nations. 
To-day,  however,  war  never  lasts  long.     It  is  now 
beyond  any  nation  to  carry  it  on  for  more  than 
a   few  months  with  a   foe  of  equal  resources.     A 
million   dollars    a   day   is   a   moderate   cost   for   a 
moderate    war.     Large    wars    can    be    had    at    a 
proportionate  rate.      But  the  lanes  of  traffic  are 


ABOLITION  OF  PIRACY  93 

soon  open  again  and  control  of  the  sea  no  longer 
exists. 

To  say  that  the  United  States  must  fight  Japan 
for  "Control  of  the  Sea,"  as  some  of  our  armament 
promoters  have  claimed,  is  the  height  of  absurd- 
ity. There  is  nothing  to  fight  about,  and  the 
fight  over,  nothing  would  be  settled.  There  is 
room  for  a  thousand  merchant  ships  on  the  Pacific 
where  one  now  sails.  If  by  control  of  the  sea 
we  mean  the  fact  that  one  nation  has  more  mer- 
chant ships  than  any  other  or  even  all  others, 
very  well.  This  is  not  a  matter  of  war  and  has 
no  relation  to  war-ships.  The  Pacific  may,  as 
has  often  been  said,  be  "the  scene  of  the  great 
deeds  of  the  twentieth  century,"  but  these  will  be 
deeds  of  peace  and  constructive  effort.  "Sea 
Power"  will  then  disappear  as  a  nightmare  of 
history. 
Abolition  of  Legalized  Piracy 

Moreover  one  of  the  next  acts  of  The  Hague 
Conference  is  almost  certain  to  be  that  of  the 
neutralization  of  all  merchant  and  passenger 
vessels.  When  this  comes  about  piracy  will  no 
longer  be  one  of  the  great  evils  of  war. 

Under  the  laws  of  war  as  accepted  in  1899  after 
the  first  Hague  Conference,  private  property  on 
land,  unless  used  for  war  purposes,  is  immune 
from  seizure  or  destruction.  Thus  far,  under 
these  laws  private  property  at  sea  may  be  seized 
by  the  crews  of  hostile  vessels  and  appropriated,  as 
prizes,   to    their   personal    benefit.     The    right   to 


94  UNSEEN  EMPIRE 

plunder  is  supposed  to  stimulate  officers  and  men 
to  renewed  activity.  Great  Britain  has  upheld 
this  right,  presumably  because  she  has  more  men 
to  encourage.  But  she  has  also  most  to  lose  and 
some  of  the  ablest  of  British  statesmen  are  now 
in  favor  of  the  neutralization  of  non-combatants 
and  their  property  on  sea  as  well  as  on  land. 

The  old  point  of  view  of  the  English  admiralty 
was  expressed  in  1861,  by  Lord  John  Russell,  that 
England  with  her  superior  navy  must  aim  at  ruin- 
ing the  commerce  of  the  nations  at  war  with  her 
in  the  shortest  possible  time  after  the  outbreak  of 
hostilities,  and  thus  ensure  not  only  her  overlord- 
ship  of  the  sea  but  also  her  supremacy  of  trade 
for  all  times.  .  .  .  "It  is  impossible  for  other 
nations  to  take,  lying  down,  such  a  perpetual 
menace.  .  .  .  The  chief  essentials  to-day  for 
the  maintenance  of  peace  are  the  general  enforce- 
ment of  the  principle  of  the  *open  door'  and  the 
general  recognition  of  the  inviolability  of  private 
property  at  sea.^ 

While  at  the  beginning  of  each  international 
war  of  the  last  century,  a  certain  number  of  ships 
have  been  seized  as  prizes  there  is  no  evidence  that 
the  final  results  of  any  conflict  have  been  in  the 
least  affected  by  these  preliminary  acts  of  piracy. 

Keeping   Step 

The   excessive   cost   of   armament   when   recog- 
nized   is    usually    considered    inevitable.     A    Jap- 
6  Professor  Lujo  Brentano:  Munich,  1912. 


KEEPING  STEP  95 

anese  writer  in  the  "Chuo-Koron"  says :  "No  doubt 
the  war  taxes  of  160,000,000  yen  per  year  are 
destroying  our  country,  but  the  strain  of  inter- 
national relations  will  not  allow  us  to  lower  our 
taxes.  What  we  have  to  do  is  to  strive  to  in- 
crease our  natural  wealth  so  that  the  burden  of 
taxation  will  not  seem  so  heavy.  To  reduce 
Japan's  army  is  impossible,  owing  to  the  neces- 
sity of  looking  to  the  future  of  China,  while  to 
reduce  expenditures  in  the  navy  is  equally  im- 
possible. We  must  do  everything  to  keep  the 
prestige  of  our  glorious  nav}'." 

Lafcadio  Hearn  says  that  "the  Japanese 
farmers  wade  knee  deep  in  the  mud  to  produce 
the  rice  they  cannot  eat  themselves  in  order  to 
buy  poorer  rice  and  let  their  Government  build 
battleships  to  show  that  Japan  has  a  place  among 
the   great   Powers." 

One  of  the  ablest  of  Japanese  statesmen,  and 
himself  opposed  to  the  policy  of  debt,  voices 
the  common  feeling  of  Japan  that  the  chief  reason 
for  the  development  of  the  Japanese  navy  lies 
in  the  increase  of  armament  of  the  United  States. 

This  is  not  that  Japan  really  supposes  herself  in 
danger  from  the  United  States.  It  is  rather  that 
the  larger  nations  set  the  fashion.  It  is  feared 
also  that  the  financial  credit  of  Japan,  jealously 
guarded  by  her  ministry,  may  suffer  if  she  fails 
to  keep  step  with  her  sister  nations. 

Bad  habits  are  catching.  In  Argentina  it  is 
only   a   "banal  commonplace   to   observe   that  the 


96  UNSEEN  EMPIRE 

peace  of  the  world  has  no  better  support  than 
naval  preparation  in  every  quarter."  The  jour- 
nal, La  Argentina,  continues: 

"The  demand  for  a  naval  fleet  of  Argentina  does 
not  imply  the  possibility  of  conflict  with  our  neigh- 
bors. The  ground  for  this  demand  is  that  the  rich 
productions  of  the  country  make  oceanic  navigation 
indispensable,  with  the  result  that  Argentina  should 
be  in  position  to  make  her  merchant  flag  respected. 

"Away  with  weak  and  idle  pacifism  and  down  with 
all  those  who  oppose  tooth  and  nail  the  project  for 
a  powerful  Argentine  Navy. 

"The  arguments  stated  above  point  out  to  the  peo- 
ple at  large  and  to  the  powers  that  be  the  importance 
of  a  complete  reorganization  of  our  Navy,  especially 
as  regards  the  material,  size  and  number  of  its  ships. 
At  the  same  time  we  must  condemn  the  attitude  taken 
by  our  pacifists  and  the  falsity  of  the  position  as- 
sumed by  those  who  persist  in  a  systematic  opposi- 
tion to  all  schemes  of  naval  expansion." 

The  Monroe  Doctrine 

It  is  claimed  by  certain  militarists,  that  "the 
Monroe  Doctrine  goes  as  far  as  our  navy  can 
reach  and  no  farther."  In  other  words,  this 
slogan  of  the  republic  rests  on  force  and  force 
alone.  If  that  is  the  case,  it  is  not  worth  the 
cost.  If  it  rests  on  force  and  not  on  right,  the 
sooner  it  is  done  away  with  the  better.  It  may 
be  indeed  that  it  really  has  no  claim  on  our  re- 
spect. It  may  be,  also,  that  our  occupation  of 
the  Philippines  has  already  repealed  the  Monroe 


UNWILLINGNESS  TO  PAY  97 

Doctrine.  For  there  is  a  sort  of  Golden  Rule 
among  nations,  that  no  one  of  them  can  do  what 
it  forbids  to  its  neighbors. 

If  the  Monroe  Doctrine  has  any  validity,  it  is 
a  definable  part  of  international  law.  It  was 
originally  a  proclamation  against  European 
spoliation  in  regions  geographically  allied  to  the 
United  States.  It  is  fair  to  others  that  the  doc- 
trine should  have  a  modern  formulation  by  ex- 
perts in  international  law.  It  is  a  reproach  to 
ourselves  that  this  has  never  been  done.  Such  a 
formulation  should  command  the  assent  and  ap- 
proval of  statesmen  in  all  nations.  The  point  at 
issue  is  that  the  nation  stands  for  justice,  not 
for  the  protection  of  delinquents. 

The  Monroe  Doctrine  would  not  necessarily 
forbid  transfer  of  sovereignty  even  from  an  Ameri- 
can republic  to  a  European  empire.  It  would 
prohibit  its  transfer  by  force  of  arms.  It  is  not 
evident  that  we  have  any  right  to  go  further  than 
this.  The  belief  that  we  may  do  so  is  giving 
effect  to  the  contrary  "Calvo  Doctrine"  that 
Latin  America  can  take  care  of  herself.  Allied  to 
this  is  the  "Drago  Doctrine"  that  no  nation 
should  collect  money  for  its  subjects  by  force  of 
arms. 
Unwillingness  to  Pay 

In  one  of  his  many  discourses  on  sea-power, 
Admiral  Mahan  suggests  that  the  growing  un- 
willingness of  the  people,  the  world  over,  to  pay 
for  it  may  be  due  to  their  "degeneration."     "De- 


98  UNSEEN  EMPIRE 

generation,"  as  thus  used,  is  a  word  without  mean- 
ing. The  only  "national  degeneration"  known 
to  history  is  found  in  the  reduction  of  the  average 
force  of  the  units  of  which  a  nation  is  composed. 
Such  reduction  may  be  due,  as  a  temporary  mat- 
ter, to  poverty  or  to  failure  in  education  or  to 
oppression  of  any  sort ;  or,  as  a  permanent  mat- 
ter, to  emigration,  to  immigration  or  to  war. 
Emigration  in  many  parts  of  the  world  has  low- 
ered the  average  at  home  by  taking  away  the  best. 
Immigration  may  lower  the  average  in  any  region 
by  filling  it  up  with  poorer  stock,  "the  beaten  men 
of  the  beaten  races."  The  general  effect  of  war 
is  to  destroy  the  virile,  leaving  the  commonplace 
to  reproduce  their  kind.  In  this  sense,  war  and 
immigration  have  each  produced  a  varying  de- 
gree of  "degeneration"  in  most  parts  of  the  world. 
But  we  can  find  better  explanations  for  the 
increasing  aversion  of  the  people  to  borrowing 
more  money  for  more  sea  power.  Their  growing 
sense  of  tax-oppression  on  the  one  hand,  their 
rising  intelligence  on  the  other  and  the  increas- 
ingly murderous  cost  of  the  whole  thing  seem  to 
furnish  adequate  reasons.  It  may  be  true,  as 
Admiral  Mahan  indicates,  that  the  growing  cost  of 
armament  no  more  than  keeps  pace  with  the  in- 
crease of  national  wealth.  (In  other  words,  it 
follows  "Johnson's  law,"  to  which  I  have  several 
times  referred.)  But  in  this  discussion,  we  may 
ask  whose  wealth  it  is  that  keeps  pace  with  the 
growing  cost  of  militarism.     A  nation's  capacity 


POWER  AND  POVERTY  99 

to  pay  is  not  measured  by  the  swollen  fortunes  of 
armament-builders  nor  of  those  financiers  "without 
a  country"  who  loan  the  necessary  money.  In  the 
long  run,  it  is  the  common  man,  the  ultimate  pro- 
ducer and  the  ultimate  consumer,  who  pays  for  all. 
In  all  waste  production  and  in  all  waste  consump- 
tion, the  cost  falls  on  the  worker  in  the  end. 

Sea  Power  and  Poverty 

There  is  no  question  that  the  excessive  and 
growing  cost  of  armament  is  one  of  the  great 
factors  in  national  poverty.  The  greater  the  sea 
power,  the  less  the  nation  has  for  other  pur- 
poses. It  is  agreed  in  Great  Britain  for  exam- 
ple that  to  strengthen  the  army  is  to  weaken  the 
navy,  the  limit  of  taxation  being  already  so  nearly 
reached.  As  sea  power  grows,  the  nation  weak- 
ens through  loss  of  reserve  power  and  through 
the  stress  of  taxation.  The  weaker  the  nation, 
the  greater  its  need  of  sea  power.  In  this  para- 
dox we  find  a  clue  to  the  persistent  state  of  alarm 
in  England,  whose  sea  power  fairly  balances  that 
of  all  her  rivals  taken  together.  She  fears  Ger- 
many on  the  one  hand,  her  own  unhappy  proleta- 
riat on  the  other,  and  no  accession  of  sea  power 
can  protect  her  from  internal  discontent. 
England  is  rich,  if  you  look  at  her  from  above. 
The  great  dukes  got  her  land — for  nothing  and 
free  from  taxes — in  the  early  "merry"  days  when 
a  county  might  be  given  to  a  royal  favorite  free 
of    taxation,    except    for    his    pledge    to    raise    so 


100  UNSEEN  EMPIRE 

many  troops  on  call.  From  this  pledge  the  great 
lords  have  long  since  been  released  by  processes 
of  easy  commutation.  Even  yet,  they  still  hold 
half  of  England  in  their  grip.  Looked  at  from 
below,  England  is  very  poor.  It  is  said  that 
out  of  a  hundred  Englishmen  only  six  make  a 
last  will  and  testament.'  The  rest  have  nothing 
to  leave.  One  man  in  seventy  holds  about  all  that 
is  worth  having. 

London  is  at  once  the  poorest  and  the  richest 
of  all  cities.  Her  East  End  is  the  hopper  into 
which  fall  the  incompetents  of  the  land,  the 
generations  of  those  whom  war  could  not  use. 
At  the  same  time  she  is  the  clearing  house  of  the 
world.  The  traders  of  all  nations  meet  there  to 
balance  their  accounts.  She  is  the  center  of  the 
buying  and  selling  of  money, — but  not  the 
people's  money. 

The  shadow  of  debt  in  England  and  on  the 
continent  grows  with  the  growth  of  sea  power 
and  land  power  and  imperial  dominion.  It  looms 
darker  still  against  a  glowing  background  of 
pomp  and  circumstance.  For  the  debt  of  the  na- 
tion is  the  debt  of  the  toiler.  It  is  borne  on  the 
back  of  industry. 

"Fall  to  each,  whate'er  befall. 
The  farmer,  he  must  pay  for  all." 

Behind  and  beneath  all  public  affairs  stand  the 
people.     They   do   not   count   for   much   in   great 
7  Reginald  J.  Campbell  at  Ford   Hall,  Boston. 


POWER  AND  POVERTY  101 

displays  and  their  final  end,  according  to  Gam- 
betta,  is  a  "beggar  crouching  by  a  barrack  door." 
Yet  as  soldiers  and  as  taxpayers  they  are  really 
necessary  to  the  continued  dominance  of  a  great 
and  fearless  nation.  An  essential  element  in 
militarism  is  a  patient  industrial  army  which  can 
pay  the  costs.  It  seems  plain  enough  that  the 
great  lords  cannot  pay  the  taxes  and  that  the 
great  bankers  will  not.  To  be  relatively  tax-free 
is  one  of  the  natural  privileges  of  greatness. 

It  is  true  that  in  England  the  lords  are  com- 
ing more  and  more  to  bear  their  share  of  the  costs 
they  help  to  create.  In  continental  Europe  tax 
discrepancies  are  greater.  It  must  be  granted 
however,  that  the  world  over,  in  America  as  well 
as  in  Europe,  industry  carries  more  than  its 
share  of  the  burdens. 

^^Gare  au  bas  vide"  (beware  of  the  empty  stock- 
ing), was  a  warning  of  Gambetta.  To  tax  too 
closely  is  to  risk  the  overthrow  of  organized  gov- 
ernment. 


VI.     "SYNDICATES   FOR   WAR" 

It  is  a  fact,  more  or  less  well  known,  that  the 
arguments  that  "expansion  of  armaments  is 
necessary  to  insure  peace,"  that  "big  armies  and 
navies  are  the  insurance  premiums  of  peace,"  and 
that  "to  insure  peace  a  nation  must  always  be 
prepared  for  war,"  rest  heavily  on  the  desires  of 
the  armament  syndicates  to  keep  up  their  busi- 
ness. The  armament  lobby  of  Europe  is  the  most 
powerfully  organized  instrument  of  its  kind  in 
the  world.  Its  operations  are  consciously  and 
carefully  planned.  It  is  ably  supported  by  a 
very  large  body  of  men  and  women  consciously 
or  unconsciously  interested  in  one  fashion  or 
another  in  military  expenditure.  It  has  also  the 
continual  and  effective  backing  of  that  class,  in 
business  or  in  journalism,  who  in  Burke's  famous 
phrase  "scent  with  delight  the  cadaverous  odor 
of  lucre."  The  term  "Armor-Plate  Press"  is  ef- 
fectively applied  by  Francis  W.  Hirst  to  the  large 
group  of  subsidized  journals.  ^'Difonse  not  De- 
fiance,^'' says  Robert  Young,  is  the  "international 
code-signal"  of  the  n.-niament  pirates. 

The  British  Ship  Lobby 

In  a  recent  article,^  Francis  McCullagh  of 
London  describes  the  "greatest  of  the  unseen  and 

1  Syndicates  for  War;  'New  York  Evening  Post,  April  1, 
1911. 

102 


BRITISH  SHIP  LOBBY  103 

pernicious  forces  with  which  economists  have  to 
contend."  These  are  "the  powerful  companies 
which  exist  to  produce  armaments  and  which 
have  been  encouraged  to  increase  their  capital 
obligations  within  the  last  few  years  by  the  suc- 
cessive scares  and  naval  programmes  of  the  last 
decade."  The  capitalization  of  the  six  leading 
English  firms  is  thus  quoted  from  the  London 
Morning  Leader: 

Vickers,  Sons  and  Maxim $  40,000,000 

Cammell,  Laird  &  Co   20,500,000 

Armstrong,  "WTiitworth  &  Co 33,500,000 

Wm.  Beardmore  &  Co 18,500,000 

John  Brown  &   Co 21,000,000 

Thames  Ironworks  Company 4,300,000 

$137,800,000 

This  list  is  by  no  means  complete  so  far  as 
England  is  concerned.  "The  importance  of  these 
figures,"  says  McCullagh,  "is  evident.  The 
country  has  encouraged  private  concerns  to  ex- 
pend these  sums  so  that  they  may  be  productive 
of  profits  year  by  year  for  the  benefit  of  their 
shareholders.  Any  restriction  in  the  building  of 
armaments  either  by  the  home  or  foreign  Govern- 
ments has  disastrous  results  on  the  year's  profits. 
It  requires  no  stretch  of  the  imagination  to  see 
that  the  enormous  number  of  investors  in  every 
class  of  society  scattered  through  the  country 
exert  a  subtle  influence  in  favor  of  the  expansion 


104  UNSEEN  EMPIRE 

of  armaments.  The  numbers  are  not  so  much  as 
the  quality."  According  to  the  Investor's  Re- 
view, the  social  position  of  some  of  the  leading 
owners  of  three  of  the  principal  firms  is  as  fol- 
lows: 

Vickers  Brown  Armstrong  & 
&  Maxim  &  Co.    Whitworth 

Duke    2  1 

Marquis     2 

Earl  or  Baron    50  10  60 

Baronet 15  2  15 

Knight     5  5  20 

Member  of  Parliament.        3  2  8 

J.  P 7  9  3 

K.  C 5 

Military  or  Naval  Offi- 
cer          21  2  20 

Journalist    6  3  8 

It  is  said  that  the  plant  of  Vickers'  Sons  and 
Maxim  is  prepared  to  lay  down  and  complete 
three  dreadnaughts  in  three  years  without  going 
outside  its  own  factories. 

Whatever  the  final  effect  on  Great  Britain  or 
on  civilization,  these  plants  must  be  fed  with 
government  orders. 

At  the  Lord  Mayor's  Banquet,  in  November, 
1911,  Mr.  Winston  Churchill,  first  lord  of  the  Ad- 
miralty, is  quoted  as  saying  that  "naval  suprem- 
acy is  the  whole  foundation  of  the  British  Empire. 
Upon  it  stands,  not  the  empire  alone,  not  merely 


BRITISH  SHIP  LOBBY  105 

commercial  prosperity,  not  merely  a  first  place 
in  the  world's  affairs,  but  actually  our  lives  and 
the  freedom  we  have  guarded  for  nearly  a  thou- 
sand years." 

If  an  independent  and  courageous  leader  in 
"Liberal"  politics  thus  makes  himself  the  mouth- 
piece for  the  armament  syndicate,  it  is  not  sur- 
prising that  minor  officials  should  feel  the  same 
patriotic  impulse.  In  the  London  Nation  (March 
9,  1912)  we  are  told  that  two  government  offi- 
cials "occup3'ing  distinguished  and  confidential 
positions"  have  joined  the  Armstrongs  as  di- 
rectors. "Sir  Charles  Ottley  was  until  the  other 
day  the  naval  Secretary  of  the  Defence  Commit- 
tee, and  in  this  and  other  high  and  confidential 
posts  must  have  had  access  to  all  the  inner  secrets 
of  our  defensive  services.  Sir  George  Murray 
was  .  .  .  the  Permanent  Secretary  of  the 
Treasury  and  was  therefore  the  official  head  of 
the  Bureau  which  controls  national  expenditure. 
The  weight  of  experience,  of  confidential 
knowledge  of  social  and  oflicial  ties,  which  has  thus 
been  added  to  the  resources  of  a  firm  competing 
for  contracts  could  hardly  be  exaggerated.  .  .  . 
Henceforth  it  will  be  in  the  minds  of  senior  men 
that  .  .  .  such  valuable  appointments  are 
open  to  them  on  their  retirement.  They  must 
constantly  meet,  oflficially  or  socially,  the  agents 
of  firms  which  might  so  reward  them,  and  in  their 
dealings  the  tempting  thought  can  hardly  fail  to 
insinuate  itself  in  their  minds,  that  a  public  serv- 


106  UNSEEN  EMPIRE 

ant  who  stands  well  with  a  great  contractor  may 
look  to  him  in  his  declining  years  for  a  very  valu- 
able and  remunerative  post." 

Militarism  Further  Entrenched 

In  referring  to  the  standing  army  of  men  now 
maintained  by  the  British  Empire,  the  "largest 
peace  establishment"  in  the  world,  Mr.  George 
Herbert  Perris  ^  says  : 

"And  behind  this  force  of  able-bodied  and 
middle-aged  Englishmen,  there  lie  two  bodies, 
also  of  adult  men,  most  skilled  and  able-bodied, 
whose  numbers  can  be  only  approximately  deter- 
mined:  (1)  Those  engaged  in  the  arsenals  and 
dockyards,  and  the  numerous  armament  trades ; 
and  (2)  Pensioners,  small  and  large,  possibly 
100,000  of  them,  since  their  cost  on  the  estimates 
is  about  £2,500,000  a  year. 

"The  probability  is,  that  at  least  1,500,000 
adult  able-bodied  men — or  one  in  six  of  the  'oc- 
cupied' adult  males  of  the  United  Kingdom — 
share,  to  some  extent,  in  the  £65,000,000  a  year 
which  we  spend  on  the  twin  'defense'  senices. 
Thus,  even  when  we  remember  that  many  of 
these,  like  the  'Terriers'  and  Reservists,  get  a 
mere  allowance,  while  a  large  part  of  the  regular 
army  is  paid  for  by  India,  it  will  be  seen  that  we 
have  here  the  most  widely  ramified  of  all  our 
vested  interests,  a  fearful  drag  upon  reproduc- 
tive industry,  and  an  influence  which  must  often 
2  "Hands  Across  the  Sea." 


ARMAMENT  SYNDICATES  107 

diverge  from  the  straight  line  of  democratic  ad- 
vance. The  big  prizes,  of  course,  all  go  to  a  small 
class  of  financiers  and  industrial  magnates,  who, 
in  order  to  keep  the  game  going,  exert  a 
thoroughly  pernicious  influence  on  Parliament 
and  middle-class  opinion.  The  higher  official 
ranks  of  the  army  and  navy  are  an  aristocratic 
preserve,  and  are  highly  organized  for  the  ad- 
vancement of  their  professional  interests.  This 
alliance  of  money  power  and  class  power,  whose 
shibboleth  and  trademark  is  'Imperialism,'  in- 
cludes the  most  determinedly  reactionary  element 
in  British  society. 

"We  are  a  part  of  a  world-wide  movement 
against  obsolete  forms  of  servitude,  savagery  and 
waste.  The  best  of  the  civilization  of  to-day  is 
on  our  side  and  the  power  of  to-morrow  is  ours. 
Greedy  contractors,  silly  scare-mongers,  and  their 
official  friends  whether  in  Germany  or  in  England, 
are  not  checked  by  warlike  preparations  on  the 
other  side — quite  the  reverse.  Each  country 
must  get  rid  of  its  own  parasites.  The  demo- 
cratic parties  in  each  land  must  cut  the  claws  of 
the  enemies  of  the  people.  This  is  the  work  of 
national  defence — the  only  road  to  real  national 
security,  the  only  true  patriotism." 

Activities  of  Armament  Syndicates 

It  is  stated  on  good  authority  that  the  estab- 
lishment  created   by    the   late   "King   Krupp    of 


108  UNSEEN  EMPIRE 

Essen,"  ^  still  the  most  noted  of  all  builders  of 
engines  of  war,  maintains  its  ambassadors  in 
every  court  of  Europe.  It  is  the  business  of 
these  "strong,  silent  men"  to  force  or  coax  the 
rulers  of  the  nations  into  patriotic  rivalry  in  the 
matter  of  buying  great  guns  and  great  warships 
on  credit.  Behind  them,  still  stronger  and  more 
silent  men  are  prepared  to  loan  the  money  needed 
on  the  terms  of  a  moderate  rate  of  interest  and 
a  cash  bonus  in  advance.  One  of  our  greatest 
railroad  builders  used  to  boast  that  no  one  could 
trail  him  "by  the  nickels  he  had  dropped."  But 
it  is  claimed  that  the  initiated  can  trace  Krupp's 
men  across  the  continent  of  Europe  by  their  tips 
and  douceurs  as  well  as  by  the  political  downfall 
of  the  public  officials  not  open  to  their  persua- 
sions. Not  long  since,  according  to  McCullagh, 
the  war  minister  of  Servia  was  forced  by  Ger- 
many to  resign  because  he  had  noted  the  personal 
interest  of  the  German  minister  at  Belgrade  in 
the  supplying  of  guns.     M.  Clemenceau  intimates 

3  The  directors  of  the  Krupp  Company  have  recently 
declared   a  dividend  of  25  per  cent. 

The  Austrian  establishment  for  the  manufacture  of  fire- 
arms ("Fabrique  d'Armes  Autrichiennes")  has  declared  a 
dividend  of  16  per  cent,  after  a  large  addition  to  the  re- 
serve fund.  The  stock  of  all  these  companies  is  far  above 
par,  as  far  as  that  of  the  nations  they  rob  is  below.  The 
larger  the  armament  the  more  easily  may  further  increase  be 
secured.     Each  step  widens  the  circle  of  bribery. 

It  is  said  that  the  imperialist  journal  VeheraU  "carries 
sixteen  pages  of  advertisements  of  the  Krupp  and  Schican 
companies." 


ARMAMENT  SYNDICATES  109 

that,  in  Argentina,  "French  guns  are  beaten  by 
the  German  because  the  emissaries  of  Krupp  and 
his  associates  are  more  generous  in  their  tips," 

McCullagh  also  tells  of  meeting  in  Con- 
stantinople a  military  emissary  selling  arms  to 
the  Turks  after  putting  through  a  good  busi- 
ness in  St.  Petersburg.  "At  that  moment,"  says 
he,  "the  young  Turk  officer  was  supposed  to  be 
so  full  of  patriotism  that  he  would  cut  your  head 
off  if  you  so  much  as  hinted  at  bribery.  But  this 
astute  military  man  from  the  North  assured  me 
that  bribes  were  still  accepted  and  still  ab- 
solutely necessary.  As  a  matter  of  fact,  he 
bought  up  whole  commissions  of  experts  who  were 
appointed  to  examine  the  weapons  he  had  sub- 
mitted." 

"That  all  this  diabolical  activity,"  continues 
McCullagh,  "makes  for  war  is  beyond  all  doubt. 
The  good  folks  who  sell  Turkey  a  hundred  million 
cartridges  would  not  be  averse  to  a  Balkan  scare 
or  even  to  a  Balkan  war  which  would  make  Turkey 
want  another  hundred  million  to-morrow." 

That  in  the  United  States  similar  activities  are 
at  work,  both  in  and  out  of  Congress,  is  a  fact 
well  attested  although  details  are  not  easily 
secured.^      Whenever  the  question  of  appropria- 

■*  In  different  issues  of  the  New  York  Ei-eninr/  Post  of 
some  four  years  apo  is  given  a  full  aeeount  of  the  efforts 
nt  that  time  of  one  "General"  of  militia,  editor  of  Arms 
and  the  Man,  ahout  the  halls  of  Congress  in  the  interest  of 
various  plans  of  military  expenditure.  Through  his  activ- 
ity a  "National  Board  for  the  Promotion  of  Rifle  Practice" 


110  UNSEEN  EMPIRE 

tions   is  brought   to  the  front  we  hear  the  same 

old  stories  as  to  the  designs  of  Germany  on  the 

Monroe  Doctrine,  and  the  schemes   of  Japan   on 

was  established.  This  Board  maintained  an  active  press 
agent,  "to  be  paid  for  his  work  through  voluntary  contri- 
butions made  by  powder  and  ammunition  makers  and 
other  persons  and  parties  interested  in  the  rifle  practice 
propaganda."  "The  matter  written  by  the  Press  Agent 
was  distributed  by  the  War  Department  and  sent  out 
free  under  the  franking  privileges." 

The  main  purpose  of  the  "General's"  activities  was  to 
induce  the  Government  to  supply  militia  companies  with 
guns,  ammunition  and  trophies  and  especially  to  induce  the 
purchase   of   ammunition   from   private    companies. 

The  "General"  greatly  regrets  "that  the  United  States 
does  not  buy  a  considerable  and  fixed  proportion  of  its 
ammunition  from  commercial  manufacturers  each  year. 
Such  a  course  would  aflford  an  invaluable  means  of  com- 
paring the  merits  of  the  respective  creations  and  effect  the 
stimulation  of  each  by  competition.  ...  A  similar 
method  should  be  employed  in  obtaining  our  rifles."  To 
this  end  he  urges  that  besides  the  "School  of  Musketry  at 
the  Presidio  of  Monterey,"  we  should  have  eight  others, 
displacing  "a  system  of  target  practice  which  is  archaic." 

The  DuPont  Powder  Company  issues  a  pamphlet  on  the 
"Policy  of  Patriotism,"  in  which  it  is  clearly  shown  that 
its  factories  "can  be  regarded  in  no  other  light  than  quasi- 
governmental  institutions."  "Approximately  $300,000,000  is 
expended  annually  on  the  Army  and  Navy,  and  less  than 
one  per  cent.,  or  about  $3,000,000,  of  this  vast  sum  goes  to 
powder.     How  important  the  item  of  excellence !" 

A  friend  in  Congress  calls  my  attention  to  the  following 
significant   abstract   from   the  Congressional   Record,   April 
28,  1911,  in  reference  to  a  Senator  from  Delaware: 
"Mr.  du  Pont" 
Assignments: 

Military  Affairs,  Chairman. 

Coast  Defenses. 

Expenditures   in  the  War  Department. 

Pensions. 


"WAR  SCARE"  111 

California  or  the  Philippines.  We  are  told  of 
"35,000  Japanese  ex-soldiers  in  Hawaii,"  of  the 
purchase  by  Japan  of  Magdalena  Bay  "where 
she  has  already  75,000  soldiers,"  of  the  need 
of  "meeting  our  enemies  in  the  open  ocean," 
of  the  "Danger  Zone  of  the  Caribbean  Sea,"  and 
of  other  matters,  real  or  imaginary,  calculated  to 
induce  us  to  continue  to  "throw  good  money  after 
bad"  in  the  interests  of  naval  preponderance. 

The  "War  Scare"  as  a  Weapon 

The  chief  weapon  of  the  Armament  Syndicate, 
because  the  most  effective  one  for  persuading  a 
nation  to  go  more  and  more  deeply  into  debt,  is 
the  "war  scare."  Always  the  one  nation  is  pitted 
against  the  other.  Always  there  is  imminent  dan- 
ger from  our  neighbors.  Awful  revelations  ap- 
pear at  critical  moments.  Not  alone  in  Europe, 
where  war  scares  have  a  mischievous  diplomacy 
behind  them,  but  also  in  the  United  States,  the 
peace  center  of  the  world.^  Curiously  enough, 
the  "war  scare"  appears  also  in  Australia  and 
New  Zealand.  No  part  of  the  world  is  more 
naturally  immune  from  even  the  thought  of  war 
than  New  Zealand,  but  even  here  the  emissaries  of 
armament  arc  active.  Patriotic  zeal  calls  for 
universal   conscription   and    the   "impending  dan- 

0  "If  our  na\y  should  shrink  to  lesser  proportions  and 
should  be  permitted  to  fall  below  the  level  of  Germany, 
France  and  Japan,  these  nations  would  bully  our  commerce 
and  insult  our  Monroe  Doctrine  whenever  they  felt  like 
it." — (Republican    Peace    Committee,    New    York.) 


112  UNSEEN  EMPIRE 

ger  of  Japanese  invasion"  is  urged  with  a  vigor 
worthy  of  a  real  cause.  Ah-eady  Japanese  fisher- 
men have  been  seen  on  the  reefs  of  New  Cale- 
donia, barely  a  thousand  miles  away !  There  is 
not  the  slightest  evidence  that  Japan  or  anybody 
in  Japan  has  any  designs  whatever  on  Australia 
or  New  Zealand.  The  whole  agitation  would  be 
absurd  if  it  were  not  thoroughly  mischievous. 

The  storm  center  of  war  scares  is  found  in 
England,  not  that  her  danger  is  greater,  but 
because  she  has  more  builders  of  armament.  It 
is  in  the  interest  of  these  men,  not  of  the  nation, 
that  Great  Britain  shall  have  twice  the  "sea 
power"  of  any  other  nation.  The  growth  of 
England's  armament  reacts  on  Germany,  furnish- 
ing her  diplomatists  with  an  excuse  for  her  ex- 
travagance in  shipbuilding.  A  further  excuse 
for  her  army  excesses  appears  in  the  specter  of 
Panslavism,  which  is  also  readily  evoked.^ 

0  In  this  connection,  and  making  toward  the  same  end, 
we  have  the  joyous  philosophy  of  militarism.  Heinrich 
Leo  (1853)  prays  cheerfully  and  unafraid:  "May  God 
deliver  us  from  the  inertia  of  European  peoples  and  make 
us  a  present  of  a  good  war,  fresh  and  joyous,  which  shall 
traverse  Europe  with  fury,  pass  her  peoples  through  the 
sieve  and  rid  us  of  that  scrofulous  chaff  which  fills  every 
place  and  makes  it  too  narrow  for  others,  so  that  we  can 
again  live  a  decent  human  life  where  a  pestilent  air  now 
suffocates  us." 

Truer  to  fact  is  the  following:  "You  have  been  made 
sick  by  tasting  dangerous  poison.  Great  soldiers  have 
often  told  their  men  .  .  .  that  they  have  tasted 
the  .salt  of  life.  The  salt  of  life!  .  .  .  For  it  is 
nothing  but  the  salt  of  death.     It  is  a  very  subtle  poison 


"WAR  SCARE"  113 

Typical  of  the  war  scare  is  the  following  re- 
ferring to  the  story  "in  the  air,"  to  the  effect 
that  Japan  is  buying  Magdalena  Bay  as  a  coal- 
ing station. 

"This  we  have  to  say,  and  we  mean  every 
word  of  it — that  we  desire  no  trifling  or  tamper- 
ing by  a  foreign  power  with  our  neighbors  on 
the  Western  Hemisphere  that  may  prove  a  menace 
to  them  or  to  us,  or  that  may  in  any  way  interfere 
with  the  declared  principles  of  the  Monroe  Doc- 
trine. We  should  not  heed  this  hysterical  peace 
talk  that  Asiatic  missionaries  and  other  well- 
meaning  but  deluded  fanatics  are  giving  us.  We 
desire  peace,  but  the  air  seems  full  of  war.  The 
public  safety  demands  that  our  coasts  and  pos- 
sessions be  promptly  and  adequately  fortified  at 
strategic  points,  that  the  regular  army  be  in- 
creased to  its  full  strength,  that  our  State  militia 
be  organized,  drilled,  and  equipped,  and  that  we 
should  possess  a  most  formidable  navy  to  be  pre- 
pared at  a  moment's  notice  for  any  and  all  con- 
tingencies." ' 

In  Professor  Grant  Showerman's  charming 
essay,  "Peace  and  the  Professor,"  this  quotation 
appears,  accredited  to  a  modern  "Cassius" :  ^ 

"I  am  one  of  those  who  look  for  the  simplest 

which  may  lie  hidden  in  the  blood  for  many  years.  I  be- 
lieve it  is  a  terrible  thing!" — (B.  L.  Putnam  Weale;  Indis- 
creet Letters  from  Pekin;/.) 

T  Mexican  Revolution  and  American  Public  Opinion, 
p.  4,   1911.— William  Temple. 

8  Nicholas    Murray    Butler. 


114  UNSEEN  EMPIRE 

motives  of  explanation  of  action  or  of  conduct. 
My  impression  is  that  somebody  makes  something 
by  reason  of  the  huge  expenditures  in  preparation 
for  war.  Have  you  ever  noticed  that  about  the 
time  that  the  appropriations  are  under  considera- 
tion in  the  House  of  Commons,  in  the  Chamber 
of  Deputies  or  in  the  Reichstag,  or  just  before 
that  time,  hostilities  are  always  on  the  point  of 
breaking  out  in  two  or  three  parts  of  the 
world  at  once !  ...  It  might  be  worth 
while  ...  to  make  some  measurement  of 
the  sincerity  and  disinterestedness  of  the  lively 
type  of  patriotism  which  accompanies  these  mili- 
tarj'  and  naval  debates  the  world  over.  Is  the 
propelling  motive  for  them  to  be  found  in 
economics  or  in  psychology.''  .  ,  .  While 
both  these  admirable  sciences  are  represented  in 
the  make-up  of  that  propelling  motive,  economics 
is  not  always   the  less  important  of  the  two." 

Hon.  David  J.  Foster,  the  late  Chairman  of 
the  House  Committee  on  Foreign  Affairs,  ven- 
tured to  assert : 

"I  am  absolutely  convinced  that  there  is  a 
criminal  conspiracy  on  foot  for  the  purpose  of 
bringing  on  a  war  between  the  United  States  and 
Japan.  Thousands  upon  thousands  of  dollars 
are  being  spent  to  carry  on  this  propaganda,  and 
I  am  confident  that  the  plans  of  these  conspira- 
tors will  unfold  themselves  before  very  long.  I 
am  convinced  that  this  constant  agitation  for  a 
war   between    the    two   nations    is    nothing   but   a 


"WAR  SCARE"  115 

subterfuge  employed  by  those  people  who  are 
determined  that  this  government  shall  build  not 
less  than  two  battleships  each  year.  To  endanger 
the  friendly  relations  of  two  great  nations  in  or- 
der that  certain  selfish  interests  may  be  gratified 
is  nothing  short  of  criminal." 

"Looking  back  over  60  years,"  says  George 
Heck  ^  in  London :  "I  can  recall  innumerable 
scares  as  to  the  sinister  designs  of  some  foreign 
country,  scares  which  were  as  groundless  as  their 
recurrence  seems  to  be  inevitable.  When  imagina- 
tion takes  the  form  of  fear,  it  becomes  not  a 
priceless  gift,  but  a  costly  danger."  ^^ 

9  The  Nation,  London,  February  10,  1912. 

10  Among  the  really  sincere  creators  of  war  scares,  and 
there  are  such,  "General"  Homer  Lea,  author  of  the  "Valor 
of  Ignorance,"  stands  in  a  class  by  himself.  Born  in  Den- 
ver in  1876,  a  Sophomore  at  Stanford  University  in  1900,  a 
boy  with  dreams  of  Empire,  he  spent  some  time  in  Canton, 
becoming  a  member  of  some  secret  society  of  agitators. 
"Undersized  and  frail  the  little  General  in  uniform  of  his 
own  devising,  overburdened  by  his  spreading  epaulettes, 
was  always  a  figure  of  merriment  to  the  scoffers,  but  the 
very  qunlities  that  dwarfed  him  in  the  eyes  of  his  neigh- 
bors added  to  his  stature  when  the  uprising  in  China  be- 
came an  effective  reality."  {San  Francisco  Chronicle,  May 
2,  191-'.) 

His  title  of  "Commander  of  the  Second  Army  Division, 
holding  the  rank  of  Lieutenant  General  over  these  forces" 
(see  Who'n  Who,  1911,  p.  1129)  was  also  "of  his  own  de- 
vising," the  "forces"  so  far  as  known  being  "broomstick 
companies  of  Chinese  in  empty  squares  and  vacant  lots" 
about  Los  Angeles.  He  was  never  connected  in  any  way 
with  the   United   States   .Vrmy. 

The  "Valor  of  Ignorance"  is  a  crude  but  clever  echo  of 
the  military  philosophy  of  Napoleon's  times,  with  plans  of 


116  UNSEEN  EMPIRE 

The  following  note  appears  in  the  telegraphic 
despatches  of  the  week : 

"The  appearance  of  Germany  as  a  possible  sup- 
porter of  Colombia  is  regarded  here  as  the  latest 
proof  of  the  Kaiser's  willingness  to  challenge  the 
Monroe  Doctrine.  The  history  of  Germany's  in- 
triguing to  get  a  foothold  on  American  soil,  although 
it  has  not  yet  been  written,  is  of  course  well  known 
in  naval  circles  here.  The  best-informed  officers  of 
the  Navy  have  long  been  convinced  that  the  steady 
increase  in  the  German  fleet  has  been  aimed  not  at 
England  and  not  at  France,  but  at  the  United  States ; 
and  that  it  is  not  Japan  in  the  Pacific  which  we  need 
watch  most  closely,  but  Germany  in  the  Atlantic,  and 
that  it  is  with  her  rapidly  increasing  battle-ships  that 
we  shall  eventually  have  to  try  conclusions."  (San 
Francisco  Chronicle,  March  11,  1912.) 

A  few  days  later  we  read: — "Strategists  in 
Washington  have  not  the  slightest  doubt  that  the 
moment  the  spark  in  China  is  ignited,  Japan  will 
seize  upon  the  opportunity  to  grab  the  Philip- 
pines, if  indeed  that  is  not  one  of  her  principal 
objects  in  endeavoring  to  precipitate  an  inter- 
national war."  (San  Francisco  Examiner,  March 
20,  1912.) 

Still  later,  April  3,  a  climax  is  reached  in  the 
following  from  the  Los  Angeles  Examiner : 

"A    confidential    letter    received    by    a    diplomatic 

imaginary  campaifrns  to  be  executed  by  Japanese  in  Cali- 
fornia. It  has  no  value  from  the  military  or  political  point 
of  view. 


"WAR  SCARE"  117 

official  in  Washington  contains  the  startling  informa- 
tion that  the  moment  the  United  States  intervenes  in 
Mexico  a  Japanese  force  will  attack  the  United 
States.     The  letter  states: 

"  'I  know  that  Japan  is  ready  to  help  jNfexico.  I 
know  that  there  are  over  60,000  Japanese  in  Mexico, 
and  I  know  each  one  is  well  armed  and  is  only  waiting 
the  word  to  join  the  Mexican  army. 

"  'I  know  that  every  Central  and  South  American 
State  will  send  its  quota  of  men  and  money  to  help 
Mexico.  The  United  States  would  win  in  the  end, 
but  it  would  lose  its  prestige. 

"  'Germany  would  get  a  big  slice  of  Brazil;  France 
would  get  part  of  Chile,  and  England  a  part  of  Ar- 
gentina. The  Japs  would  get  the  Philippines  and 
Sandwich  Islands  and  would  bombard  the  cities  on 
the  Pacific  slope.  I  learned  this  from  a  source  that 
is  undeniable,  but  I  determined  that  I  would  not  tell 
it  unless  intervention  was  imminent.'  " 

On  the  same  day,  April  3,  191.^,  the  following 
appeared  in  the  Boston  American: 

"For  more  than  three  months  a  great  syndicate  has 
been  in  negotiation  with  the  Mexican  Government  for 
a  vast  tract  bordering  on  Magdalcna  Bay.  The 
avowed  purpose  is  to  establish  a  Japanese  colony. 
Back  of  it,  however,  is  understood  to  be  the  Japanese 
Government. 

'Already  75,000  Japanese  are  located  along  this 
most  convenient  body  of  water.  Nearly  every  ship 
of  the  Japanese  line,  which  operates  on  the  Pacific 
coast,  adds  to  the  number.  While  many  of  these 
men  are  farmers,  most  of  them  are  trained  soldiers, 
many  being  veterans  of  the  Russo-Japanese  war. 


118  UNSEEN  EMPIRE 

"So  great  is  the  menace  of  this  colony  to  the  peace 
of  the  American  continent,  according  to  information 
received  by  the  American  to-day,  that  as  far  back 
as  a  year  ago  Great  Britain  sent  a  secret  note  to  the 
United  States  demanding  that  the  Oriental  nation 
restrict  its  activities. 

"In  this  note  Great  Britain  called  attention  to  the 
fact  that  she  had  an  alliance  for  offence  and  defence 
with  Japan  and  was  therefore  unable  to  make  force- 
ful representation  herself.  Such  representation,  the 
note  insisted,  must  be  made  by  the  United  States." 

It  may  be  noted  that  Magdalena  Bay  lies  in  the 
rainless  belt  of  Lower  California,  that  the  lands 
about  it  are  uninhabited  and  practically  worth- 
less, mountainous,  and  without  vegetation  save 
scanty  cactus  and  cedar  bushes.  There  is  a  good 
harbor,  in  a  stormlcss  sea.  The  fisheries  in  the 
roadstead  are  very  rich,  and  are  covered  by  a  con- 
cession made  by  the  Government  of  Mexico  to  Mr. 
A.  Sandoval,  resident  in  Los  Angeles.  This  con- 
cession includes  all  the  fisheries  of  Lower  Cali- 
fornia. 

There  are  a  score  or  two  of  Japanese  fishermen 
in  Southern  California  and  some  of  them  have, 
I  am  told,  examined  the  Sandoval  concession. 
There  is  no  market  for  fresh  fish  in  Lower  Cali- 
fornia, but  there  is  a  chance  for  salting  large 
fish  and  for  packing  small  ones  in  oil,  as  also 
turtle  flesh  and  crabs  at  IMagdalena  Bay. 
There    is    no    town  ^^    of    any    consequence    nor 

11  As  a  matter  of  fact,  there  is  now  at  Magdalena  Bay 


"WAR  SCARE"  119 

site  for  a  town,  as  there  is  no  water,  save,  I  am 
told,  from  a  brackish  spring,  opening  among  the 
sand  dunes.  On  the  Bay,  there  was  once  a  colony 
who  gathered  from  the  rocks  the  lichen  called 
Orchilla,  then  used  as  a  yellow  dye,  but  now  re- 
placed by  the  cheaper  anilines.     The  whole  orig- 

a  village  of  100  people,  six  of  them  Japanese,  a  few 
Chinese,  the  rest  mostly  Mexicans.  These  are  employed 
at  a  cannery  owned  by  Mr.  Sandoval.  In  this,  crabs  and 
green  turtle  are  put  up  in  tins.  The  flesh  of  the  tunny 
is  salted  and  dried  while  other  fishes  are  made  into  fertihzer. 
It  is  expected  that  this  concession  will  be  ultimately  devel- 
oped with  French,  not  Japanese,  capital  and  with  the 
aid  of  French  fishermen.  There  are  practically  no  Mexi- 
can fishermen,  and  since  1907  no  Japanese  laborers  have 
been  allowed  by  the  Foreign  Office  at  Tokyo  to  come  to 
Mexico  or  to  Canada. 

A  third  enterprise  of  expatriated  Japanese  and  their  as- 
sociates in  Mexico  has  also  come  under  the  notice  and  con- 
demnation of  the  "Armor-plate  Press."  A  fishery  concession 
covering  some  200  miles  of  coast  about  Salina  Cruz,  another 
to  the  same  extent  about  Manzanillo,  and  a  third  similar  to 
these  between  these  two  points,  near  Acapulco,  have  been  of- 
fered to  bidders  for  a  period  of  ten  years,  at  a  total 
rental  of  $1500  each.  Representatives  of  the  Toyo  Hoge 
Kaisha  (Oriental  Whaling  Company)  have  secured  for  a  time 
the  refusal  of  these  concessions,  at  $2,000  for  the  three  for  a 
period  of  ten  years.  Along  these  shores  fishes  are  abun- 
dant. They  are  not  easily  preserved  by  salting,  especially 
with  Mexican  rock-salt.  They  dry  up  or  else  decay  be- 
fore the  salt  strikes  in.  The  market  for  fresh  fish  is  too 
far  away,  and  the  canning  of  sardines  in  that  climate  is 
a  precarious  business,  as  they  are  likely  to  spoil  before 
they  can  be  brought  to  land.  The  sums  involved  in  the 
whole  matter  are  petty,  and  these  little  ventures  call  for 
no  notice  from  our  Government.  There  is  not  a  shadow 
of  evidence  that  the  Japanese  Government  or  any  com- 
bination of  Japanese  capital  has  ever  had  any  designs  on 
anything  in  Mexico. 


120  UNSEEN  EMPIRE 

inal  basis  of  these  newspaper  stories  is  thus  given 
by  a  Japanese  friend,  conversant  witli  tlie  facts, 
a  man  of  the  highest  standing  in  San  Francisco: 

"There  appears  to  be  a  concern  known  as  the 
Chartered  Company  of  Lower  Cahfornia,  of  which 
John  E.  Blackman  of  Los  Angeles  is  President.  I 
do  not  know  where  or  how  this  company  was  incor- 
poratedj  or  where  its  headquarters  are;  but  it  seems 
to  be  in  possession  of  a  grant  from  the  Mexican  Gov- 
ernment of  certain  lands  on  the  west  coast  of  Lower 
California,  including  territory  on  Magdalena  Bay. 
Efforts  to  sell  a  portion  of  this  land,  or  colonize  it, 
seem  to  have  been  made  by  the  company,  and,  among 
its  other  activities,  it  has  attempted  to  interest  Jap- 
anese capital.  Through  its  representatives  it  ap- 
proached Messrs.  O.  Noda  and  K.  Abiko,  two  well- 
known  Japanese  residents  of  this  city,  and  Mr.  Noda 
was  induced  to  go  down  last  winter  and  inspect  the 
territory.  In  doing  so  he  represented  no  one  but 
himself  and  possibly  ^Ir.  Abiko.  Neither  one  of 
them  has  any  capital  behind  him,  nor  has  either  one 
of  them  any  authority  to  represent  any  bank,  steam- 
ship or  other  financial  body — let  alone  the  Govern- 
ment. Acting  in  his  personal  capacity,  Mr.  Noda 
had  a  perfect  right  to  take  the  course  he  did;  but,  in 
view  of  the  readiness  with  which  certain  trouble- 
seekers  in  this  country  are  prone  to  seize  upon  every 
opportunity  to  misrepresent  and  distort  the  motives 
of  the  Japanese  Government  and  the  individual  enter- 
prises of  its  people,  his  course  was,  perhaps,  inju- 
dicious and  unwise.  It  was  an  incident — perfectly 
proper   in   itself — but   readily   lending   itself    to   the 


"WAR  SCARE"  121 


purposes  of  mischief-makers  and  sensationalists.  Mr. 
Noda  is  now  conducting  a  little  business  in  Sacra- 
mento and  Mr.  Abiko  edits  a  newspaper  in  this  city. 
So  far  as  they  are  concerned  the  matter  is  ended." 

Whether  as  a  crab  cannery  or  speculation  in 
desert  lands,  the  whole  affair  has  no  more  interna- 
tional significance  than  would  arise  if  "Italy"  es- 
tablished a  new  peanut  stand  on  the  Bowery  "in 
dangerous  proximity  to  the  treasures  of  Wall 
Street."  '^ 

The  fear  of  Japan  lends  spice  to  journalism  in 
other  parts  of  the  world  as  well.  In  the  Japan 
Chronicle  (March  21,  1912),  I  find  a  transla- 
tion of  an  article  in  the  Russian  journal  Dalny 
Vostok.  The  writer,  who  signs  his  name  as  "Da- 
linsky,"  sees  in  the  awakening  giant  of  China 
and  the  mighty  military  power  of  Japan  a 
menace  to  Russia  making  it  "necessary  to  take 
steps  beforehand  against  a  new  Mongolian  inva- 
sion." 

He  finds  that  "at  the  present  time  Japan  for 
warlike  purposes  can  dispose  of  the  following 
forces :" 

12  Yet,  at  Washington  and  in  the  "Armor-Plate  Press" 
we  are  told  that  the  Magdalena  Bay  "Colony"  is  a  menace 
not  only  to  the  United  States,  but  to  the  Panama  Canal. 
It  is  located  at  the  same  distance  from  Panama  that  it  is 
from  Pittsburgh.  There  is  no  fuel  nor  food  (except  fish) 
obtainable  in  quantity  from  any  point  nearer  than  Mazatlan 
or  San  Diego,  both  us  far  away  as  Boston  is  from  Wash- 
ington,   with    no    regular   connections. 


122  UNSEEN  EMPIRE 


With  the  colors 
First  reserve 
Second  reserve 

763,000  men 

415,000 

831,000 

Soldiers 
Trained  militia 
Untrained  militia 

2,009,000  men 
124,000 
873,000 

Militia 
Total 

997,000 
3,006,000 

These,  "with  the  already  existing  Korean  troops," 
give  to  the  cry  of  "Asia  for  the  Asiatics!"  a  most 
powerful  backing,  and  Russia  may  indeed  trem- 
ble. "We  have  been  keeping  ourselves  quieter 
than  water,  lower  than  the  grass  .  .  .  giv- 
ing way  to  all  their  wishes,  even  tr^'ing  to  antici- 
pate them.  China  is  still  weak,  and  a  prey  to 
civil  war.  America,  until  the  digging  of  the  Pan- 
ama Canal,  is  helpless  against  Japan."  "A  crow 
does  not  peck  out  a  crow's  eyes."  .  .  .  "In 
this  outburst  (of  aggressive  movement)  Japan 
will  probably  come  into  collision  with  us  and  not 
with  the  Chinese." 

It  is  evident  that  the  imagination  of  the  "dock- 
yard strategist"  is  quite  as  vivid  and  fantastic  in 
Russia  as  in  Washington.  How  pitiful  seem  the 
75,000  armed  Japanese  gathered  b^^  Mr.  Hearst 
on  the  barren  sand  dunes  of  Magdalena  Bay  as 
compared  with  the  three  millions  thus  conjured  up 
by  this  Russian  operator! 


'WAR  SCARE"  123 


The  Sydney  Bulletin  in  Australia,  as  quoted 
in  the  Japan  Chronicle,  cites  the  case  of  one 
Yang  Ki-tak,  a  Korean  imprisoned  for  some  rea- 
son by  the  Japanese,  and  described  as  a  member 
of  "a  race  which  believed  in  the  talk  of  Peace  So- 
cieties and  spurned  the  idea  of  naval  or  other  de- 
fense." 

It  says: 

"Australia's  personal  interest  in  the  above  lies  in 
the  fact  that  the  fate  of  Yang  Ki-tak  of  Korea  may 
be  the  fate  of  John  Brown  of  Victoria  or  Bill  Smith 
of  New  South  Wales,  if  the  Great  Trouble  comes 
before  the  Commonwealth  Boy  Army  has  had  time 
to  grow  up  or  its  infant  fleet  a  chance  to  develop  into 
something  worth  while." 

Henri  Golay  (Berne,  1912)  says:  "The  actual 
political  philosophy  of  government  is  fear  of 
ghosts.  Each  state  has  two  or  three  ghosts  which 
hold  the  strings  to  which  are  attached  the  min- 
isters and  chiefs  of  that  state.  When  one  lives  under 
the  fear  of  ghosts,  one  exists  in  a  distorted  and  unreal 
light — the  veritable  moleliill  would  appear  as  a  moun- 
tain, the  little  ship  quietly  steaming  off  on  a  voyage 
would  suddenly  appear  to  assume  the  proportions  of  a 
pirate,  and  one  word  uttered  from  a  mouth  more  or 
less  responsible  is  enough  to  call  forth  a  declaration 
of  war.  Let  us  as  nations  cast  aside  our  ghosts  .  .  . 
and   disarmament  will   come  as   a  natural  sequence." 

Sir  Edward  Grey  once  observed  that  many  mis- 
understandings  could  be  averted  by  ""an  interna- 


124  UNSEEN  EMPIRE 

tional    exchange    of    journalists."     An    exchange 
of  "dockyard  strategists"  might  also  help. 

Armament  for  War  or  Peace? 

Certain  general  propositions  ma}^  be  laid  down 
as  to  war  and  peace.  To  regard  war  as  "glo- 
rious" is  to  invite  it.  To  regard  it  as  a  hideous 
calamity  is  to  avoid  it.  The  nation  which  holds 
war  in  the  background  as  a  possibility  in  case  of 
diflference  is  likely  sooner  or  later  to  resort  to  it. 
The  nation  that  eliminates  war  from  its  methods 
of  adjustment  will  find  peaceful  methods  at  hand 
whenever  differences  do  arise.  To  be  pledged  to 
arbitration  is  to  be  "thrice  armed,"  for  it  is  to 
have  one's  "quarrel  just." 

Artificial  "ententes,"  meaningless  friendships 
and  "entangling  alliances"  increase  the  danger  of 
war.  To  a  nation's  own  enemies  and  the  friends 
of  its  enemies,  these  coalitions  add  the  enemies 
of  its  friends.  The  diplomacy  which  seeks  to 
thwart  the  aspirations,  righteous  or  otherwise,  of 
other  nations  is  itself  thwarted  in  turn,  and  each 
entanglement  is  described  in  terms  of  war. 

It  is  the  claim  of  each  nation  that  its  armament 
is  solely  for  defense,  for  the  protection  of  its 
commerce,  its  colonies  or  its  coasts.  This  claim 
is  clearly  not  true  in  every  case ;  perhaps  not  true 
in  any  case. 

Purely  defensive  armament  may  make  for 
peace.  It  may  impress  rival  diplomatists  that 
war    would    be    a    risky    process.      But    defensive 


"PEACE  ESTABLISHMENT"         125 

armament  is  never  satisfied  to  remain  purely  de- 
fensive. It  is  intolerant  of  a  waiting  policy.  It 
tends  to  aggrandize  itself.  It  would  be  "pre- 
pared to  meet  the  enemy  in  the  middle  of  the  sea." 
In  other  words,  it  would  become  armament  for 
offense  as  well  as  defense.     War  involves  both. 

Moreover,  the  fighters  are  dissatisfied  with  a 
waiting  game.  "We  like  to  have  a  mark  that 
will  wriggle  when  we  hit  it.  We  cannot  have 
weapons  without  wanting  to  try  them  and  see 
whether  or  not  they  will  work." 

Professor  William  Graham  Sumner  *^  has  well 
said  : 

"There  is  no  state  of  readiness  for  war;  the  notion 
calls  for  never-ending  sacrifices.  It  is  a  fallacy.  It 
is  evident  that  to  pursue  such  a  notion  with  any  idea 
of  realizing  it  would  absorb  all  the  resources  and 
activity  of  the  state;  this  the  great  European  states 
are  now  proving  by  experiment.  A  wiser  rule  would 
be  to  make  up  your  mind  soberly  what  you  want, 
peace  or  war,  and  then  to  get  ready  for  what  you 
want;  for  what  we  prepare  for  is  what  we  shall  get." 

"War,"  says  the  German  Colonel  Gadke,  "is  the 
father  of  other  wars.  The  more  we  think  of  our  o\vn 
power  and  ability,  the  oftener  we  have  tasted  of  the 
fruit  of  victorious  war,  the  more  we  are  surrounded 
by  the  evil  spirit  of  Chauvinism  and  of  imperialism." 

The  "Peace  Establishment" 

The    military   equipment    of   England    is    often 
13  Yale  Rcviexo,  October,  1911. 


126  UNSEEN  EMPIRE 

mentioned  as  "The  Peace  Establishment."  Here 
we  have  a  stroke  of  giant  humor.  Thoreau  once 
referred  to  the  weather  as  being  "so  dry,  it  could 
fairly  be  called  wet," 

But  it  is  nevertheless  true  that  the  so-called 
"Peace  Establishment"  does  make  for  peace  in  two 
ways.  It  may  promote  the  "Peace  of  Preponder- 
ance" to  use  Lord  Rosebery's  phrase,  or  what 
we  may  call  the  Peace  of  Impotence. 

So  far  as  "preponderance"  goes,  it  is  clear  that 
a  little  nation  will  not  often  attack  a  big  one 
whatever  its  grievance.  Persia  will  not  declare 
war  on  Russia  and  England,  nor,  if  you  please, 
Colombia  on  the  United  States.  It  is  fairly  safe 
to  be  "preponderant"  but  that  fact  has  nothing 
to  do  with  justice.  ^^ 

The  "Peace  of  Impotence"  follows  an  over- 
drawn bank  account.  This  introduces  a  third 
element,  the  international  banker.  His  relations 
to  war  and  peace  have  been  already  sufficiently 
discussed  in  these  pages. 

"Peace  Establishments"  and  Secret  Diplomacy 

In  the  Europe  of  to-day,  "Peace  Establish- 
ments" serve  mainly  as  counters  in  the  game  of 
secret  diplomacy.  When  the  chief  business  of 
the  state  was  war,  the  function  of  the  diplomatist 
was    to    spy    out    weak    places    for    attack    in    his 

14  "WTiere  empires  towered  that  were  not  just 

Lo  the  skulking  wild  fox  scratches  in  a  little  heap  of 
dust!" 

—(Lowell.) 


ECONOMIC  DIFFICULTIES  127 

neighbors'  preserves,  next  to  devise  pretexts  to 
make  such  attack  seem  honorable.  The  armament 
builders  of  the  world  strive  to  keep  alive  this 
tradition.  The  presence  of  idle  armament  is  a 
constant  spur  to  diplomatic  activity.  Thus  is 
established  a  mischievous  round  of  diplomacy  and 
armament  in  which  every  "Great  Power"  is  en- 
trapped. "It  has  been  apparent,"  says  Admiral 
Mahan,  "that  the  governments  of  Great  Britain, 
France  and  Germany  have  earnestly  striven  for 
peace."  On  the  face  of  things,  such  would  not 
appear  to  be  the  fact.  Rather  the  center  of  war 
menace  seems  to  lie  in  the  Foreign  Offices  of  these 
three  nations.  If  private  citizens  behaved  toward 
their  fellows  in  like  fashion,  it  would  be  said  that 
they  were  "hunting  for  trouble." 

Great  armaments  support  a  policy  of  diplo- 
matic aggravation.  Diplomatic  aggravation  in 
turn   serves  to  make  costly   armament  inevitable. 

Economic  Difficulties  in  Disarmament 

Under  present  conditions  with  an  armament 
expenditure  for  the  world  of  over  $2,000,000,- 
000  yearly,  the  number  of  men  engaged  runs  far 
into  the  millions.  With  the  suppression  of  war 
all  of  these  men  as  well  as  all  the  other  millions  now 
withdrawn  by  conscription,  will  be  returned  to 
the  ranks  of  toilers. '° 

Such   a  transfer  will  temporarily  involve  seri- 

16  After  the  Boer  war,  according  to  McCullagh,  the 
extra  hands  employed  in  the  Government  gun-factories  at 


128  UNSEEN  EMPIRE 

ous  disturbance  in  economic  adjustment.  For 
it  is  recognized  that  any  fundamental  change  in 
labor  conditions  causes  immediate  confusion  to 
some  part  of  the  industrial  world.  The  advent  of 
peace  would  for  a  time  bring  widespread  dis- 
tress, although  it  would  soon  be  more  than  com- 
pensated for,  as  the  mass  of  the  people  would 
thus  be  released  from  the  burden  of  supporting 
millions  in  what  (economically  considered)  is  de- 
structive idleness.  When  these  also  became 
workers  the  aggregate  of  demand  and  supply 
Avould  rise  alike,  and  all  would  gain  from  the 
shutting  off  of  the  avenues  of  waste. 

During  the  period  of  transition,  however,  there 
would  certainly  be  suffering.  Would  it  be  unrea- 
sonable to  expect  the  commonwealth  which  has 
forced  its  artisans  into  gun-making,  powder- 
making  and  the  building  of  warships,  to  lead  in 
amelioration  of  conditions  following  the  change 
of  military  establishments  into  industrial  and  the 
makers  of  war  implements  into  artisans  of  peace? 
The  change  must  come — will  come — and  it  is  for 
wise  statesmanship  to  make  it  as  little  drastic  as 
possible.      As  Governments  have  reserved  to  them- 

Woolwich  had  to  be  discharjjed.  "What  else  was  to  be 
done?  The  Government  could  not  proceed  to  start  another 
war  just  for  the  sake  of  keeping  these  men  in  emplovinent, 
and  it  could  not  pay  them  for  being  idle.  Nevertheless  a 
roar  of  indignation  went  up  from  the  imperialistic  press." 
Even  the  labor  leaders,  or  some  of  them,  joined  in  this 
clamor  against  throwing  so  many  good  men  out  of  em- 
ployment merely  because  the  Government  had  nothing  for 
them  to  do. 


ECONOMIC  DIFFICULTIES  129 

selves  the  right  of  making  war,  they  should  ac- 
knowledge the  obligations  incident  to  its  passing. 
The  revival  of  the  American  Merchant  fleet  would 
go  far  to  relieve  the  exigencies  connected  with  the 
abandonment  of  war  preparation  in  the  United 
States.  As  to  our  naval  personnel,  the  changes 
impending  must  of  necessity  be  so  gradual  as  to 
cause  no  serious  embarrassment.  Our  standing 
army  is  small,  being  relatively  near  a  peace  basis. 
Its  extravagant  cost  is  due  not  to  its  size,  but  to 
the  lack  of  discretion  on  the  part  of  Congress  in 
the  needless  multiplication  of  army  posts. ^^ 

ic  See  page  168. 


VII.     WAR  TO-DAY 

Types  of  Modern  War 

In  our  time,  the  various  wars  actual  or 
threatened  may  be  divided  into  three  types. 
These  we  may  term  Civil  War ;  International 
War ;  Imperial  War. 

Civil  war  is  strife  within  the  confines  of  a  na- 
tion. It  indicates,  in  general,  the  failure  of  the 
essential  attribute  of  a  modern  nation, — the  will 
and  the  power  to  maintain  peace  within  itself. 
Internal  peace  depends  on  the  maintenance  of  a 
representative  legislative  assembly  on  the  one 
hand  and  of  courts  of  justice  on  the  other.  A 
despotism  is  essentially  a  condition  of  civil  war.^ 
Historically,  in  civil  war  every  despotism  has 
found  its  final  and  necessary  end.  Civil  war  may 
be  the  work  of  thieves,  marauders  and  malcon- 
tents ;  or  it  may  be  the  last  resort  of  "murdered, 
mangled  liberty" ;  or  it  may  also  be  an  inextri- 
cable mixture  of  the  two. 

International  war  is  a  conflict  between  recog- 
nized nations,  more  or  less  equal  in  prestige. 
This  form  of  strife  has  filled  the  pages  of  Euro- 
pean history,  and  it  stands  as  a  constant  menace 
in  the  background  of  most  of  the  diplomacy  of 
the  world. 

1  A  Chinese  saying  thus  describes  absolutism  in  China: 
"Big  fish  eat  little  fish;  little  fish  eat  shrimp;  shrimp  eat 
mud." 

130 


TYPES  OF  WAR  131 

Imperial  war,  or  in  Novicow's  classification, 
"War  of  Spoliation,"  comprises  conflicts  under- 
taken for  extension  of  national  territory  and 
rule.  Its  function  is  the  control  by  a  strong 
hand  of  inefficient  or  inadequate  peoples.  Its 
motives  may  be  various,  half-altruistic  or  wholly 
selfish,  for  riches  or  display.  The  results  may 
be  equally  various,  moral  and  physical  improve- 
ment of  the  conquered  nation,  or  the  utter  ruin 
of  its  people  through  processes  of  miltary  pacifi- 
cation, or  any  intermediate  combination  of  the 
two.  Whatever  the  motives,  it  is  worth  notice 
that  the  real  one  is  seldom  actually  avowed. 
Always  these  conflicts  take  the  guise  of  benevo- 
lence or  else  of  "military  necessity"  or  "manifest 
destiny."  It  is  said  that  the  Turks  are  the  only 
people  who  do  not  try  to  veil  in  some  way  their 
schemes  of  territorial  spoliation.^ 

The  only  check  to  civil  war  consists  in  the 
establishment  of  democracy.  Constitutional  gov- 
ernment and  the  development  of  the  courts  aff'ord 
its  only  remedy. 

International  war,  as  I  have  already  tried  to 

2  The  following  sentences  from  speeches  of  Abraham  Lin- 
coln are  pertinent  to  the  discussion  of  Imperial  Control. 

"Let  us  discard  all  this  quibbling  about  this  man  and  the 
other  man,  this  race  and  that  race  and  the  other  race  being 
inferior  and  therefore  must  be  placed  in  an  inferior  posi- 
tion." 

"What  I  do  say  is  that  no  man  is  good  enough  to  govern 
another  without  that  other's  consent." 

"The  sheep  and  the  wolf  do  not  agree  on  the  meaning  of 
liberty." 


132  UNSEEN  EMPIRE 

make  clear,  is  now  virtually  at  an  end.  The 
growth  of  debt  and  the  cost  of  armament  have 
placed  the  control  of  European  affairs  in  the 
hands  of  the  money-lenders.  It  has  forged  for 
them  weapons  against  which  the  belligerent 
nations  are  powerless.  The  more  warlike  the  na- 
tion, the  moi'e  firmly  is  it  held  in  the  actual  grip 
of  debt. 

With  Imperial  war  the  case  is  not  so  clear. 
It  is  likely  to  continue  until  all  barbarous  lands 
are  covered  by  the  flags  of  civilization.  And  the 
fierce  intrigues  and  bitter  jealousies  to  which  these 
operations  give  rise  hold  within  them  again  the 
menace  of  international  war.  But  here  too  the 
bankers  and  the  common-sense  of  the  people  may 
intervene.  Imperial  wars  are  scarcely  less  costly 
than  others,  and  almost  as  profitless.  Meanwhile 
the  public  opinion  of  the  world  is  rising  against 
and  increasingly  condemns  the  encroachments  of 
Europe  on  Asia  and  even  on  Africa. 

"The  Great  Illusion" 

Norman  Angcll  has  applied  the  term,  "The 
Great  Illusion"  to  the  idea  that  a  nation  can  be 
strengthened  or  enriched  by  war.  War  of  any 
sort  no  longer  pays.  Conquered  territory  is  al- 
ways a  burden  of  expense.  It  adds  to  national 
vigor  or  to  national  wealth  only  when  it  becomes 
an  integral  part  of  tlie  nation,  the  home  of  a 
cooperating  and  self-governing  people;  the 
"Louisiana  Purchase"  of  the  United  States  rep- 


"THE  GREAT  ILLUSION"  133 

resents  an  expansion  of  this  kind.  Illustrations  of 
costly  but  unprofitable  holdings  may  be  seen  al- 
most anywhere  on  the  map  of  Asia  or  Africa.  A 
well-governed  dependency  may  be  a  source  of 
moral  strength  to  the  parent  nation  but  not  a 
source  of  wealth.  There  can  no  longer  be  "taxa- 
tion without  representation."  A  "colony"  cannot 
safely  be  asked  to  pay  even  its  military  expendi- 
tures. The  secret  of  our  creditable  recent  govern- 
ment of  the  Philippines  lies  largely  in  the  fact  that 
the  taxes  of  the  islands  are  used  for  their  own 
public  purposes.  For  the  services  of  army  and 
navy  we  do  not  ask  them  to  pay.  Our  own  military 
outlay  in  their  behalf  has  been  estimated  (1912) 
at  $168,000,000.  Nowhere  in  America  or 
Europe  have  the  people  had  the  experience  of 
being  taxed  for  civil  expenditures  only.  In  Eng- 
land, as  Mr.  L.  T.  Hobhouse  observes :  ^  "The 
proceeds  of  expanding  revenue  flow  into  the  War 
Office  and  the  Admiralty,  and  it  is  with  difficulty 
that  social  reformers  snatch  something  on  the 
way.  .  .  .  It  is  this  constant  increase  which 
hamstrings  measures  for  the  internal  development 
of  the  country,  and  cripples  every  effort  to 
alleviate   the  widespread   misery   of  the   masses." 

For  behind  the  "Great  Illusion"  looms  the 
"Great  Debt,"  and  both  are  necessary  results  of 
the  intricate  and  futile  diplomacy  which  under- 
lies the  affairs  of  Europe  to-day. 

s Atlantic   Monthly,  March,   1912,  p.  851. 


134  UNSEEN  EMPIRE 

The  "Mirage  of  the  Map" 

By  the  "Mirage  of  the  Map"  ^  is  meant  the 
fallacy  that  national  importance  is  measured  by 
extent  of  territory.  "In  the  days"  says  Norman 
Angell,  "of  the  sailing  ship  and  the  lumbering 
wagon  dragging  slowly  over  all  but  impassable 
roads,  for  one  country  to  derive  profit  from  an- 
other it  had  to  administer  it  politically.  But  the 
steam  engine,  the  railway,  the  telegraph  have 
profoundly  modified  the  problem.  In  the  mod- 
ern world  political  dominion  is  playing  a 
more  and  effaced  role  in  commerce.  It  is 
the  case  with  every  modem  nation  that 
the  outside  territories  it  exploits  most  suc- 
cessfully are  precisely  those  of  which  it  does 
not  own  a  foot.  Even  with  Great  Britain,  the 
greater  part  of  her  over-seas  trade  is  done  with 
nations  which  she  makes  no  attempt  to  "own," 
control,  coerce,  or  dominate.  She  has  ceased  to 
do  any  of  these  things  with  her  colonies. 
The  modern  German  exploits  South  America  by 
remaining  at  home.  German  colonies  are  colonies 
'pour  rire.'  The  Government  has  to  bribe  Ger- 
mans to  go  to  them.  Her  trade  with  them  is 
microscopic.  If  the  20,000,000  people  who  have 
been  added  to  Germany's  population  since  the  war 
had  to  depend  on  their  country's  political  con- 
quest, they  would  have  had  to  starve. 
Germany  draws  more  tribute  from  South  America 

♦  Norman  Angell,  London  Daily  Mail,  November  14,  1911. 


"MIRAGE  OF  MAP"  135 

than  Spain  which  has  poured  out  mountains  of 
treasure  and  oceans  of  blood  in  its  conquest.  These 
(South  American  states)  are  Germany's  real  colo- 
nies. .  .  .  The  immense  trade  they  represent 
owes  nothing  to  the  diplomat,  to  the  Agadir  in- 
cidents, to  Dreadnaughts.  It  is  the  unaided  work 
of  the  merchant  and  manufacturer." 

In  carrying  the  French  flag  and  the  French 
debt  over  Algiers,  Tunis,  jNIorocco,  Sahara,  and 
Soudan, — about  two-fifths  of  all  Africa, — France 
has  gained  nothing  in  population  or  wealth. 
After  thirty  years  in  Tunis,  she  has  established 
a  colony  of  25,000  Frenchmen.  This  exactly 
corresponds  to  the  yearly  loss  of  population  in 
France,  "the  real  France,"  which  grows  less  every 
year.  "The  diplomats  can  point  to  25,000 
Frenchmen  living  artificially  and  exotically  under 
conditions  inimical  to  their  race,  as  expansion  and 
as  evidence  that  France  is  maintaining  her  posi- 
tion as  a  great  power.  .  .  .  There  are  to-day 
more  Germans  in  France  than  there  are  French- 
men in  all  the  colonies  that  France  has  acquired 
in  the  last  half  century  and  German  trade  with 
France  outweighs  enormously  the  trade  of 
France  with  all  French  colonies.  France  is  to- 
day a  better  colony  for  Germans  than  any  exotic 
colony  which  France   owns. 

"  'They  tell  me,'  said  a  French  deputy  'that 
the  Germans  are  at  Agadir.  I  know  they  are  in 
the  Champs  Elysces.'  "  And  Paris  is  a  mucii  bet- 
ter place  for  doing  business  than  Morocco. 


136  UNSEEN  EMPIRE 

Professor  Delbriick,  a  leading  German  Im- 
perialist, in  the  "Preussische  Jahrbiicher,"  ex- 
plains and  defends  the  spirit  of  the  "mirage  of  the 
map."  Germany  we  are  told  desires  not  isolated 
over-seas  possessions  but  "a  vast  continuous  area 
which  is  purely  German,"  It  must  stretch  some- 
where from  ocean  to  ocean  and  it  must  be  ruled 
by  an  "aristocracy  of  German  planters  and  mer- 
chants" which  will  evolve  "a  German-African  na- 
tional pride."  It  is  freely  admitted  that  no 
economic  gain  can  arise  from  the  control  of  this 
domain.  The  desire  for  it  rests  solely  on  racial 
feeling.  Mr.  H.  W.  Massingham  from  whom  we 
have  taken  the  above  quotations  compares  this  to 
the  involuntary  reflex  movements  of  an  animal 
organism  deprived  of  its  directive  nerve  centers. 
"Nations  continue  to  act  on  a  given  impulse  long 
after  the  living  thought  of  a  people  has  advanced 
beyond  the  motives  which  inspired  the  action, 
precisely  as  a  frog  will  go  on  moving  after  its 
brain  is  removed.  .  .  .  To  be  a  governing 
aristocracy  among  naked  tribes  and  to  see  German 
descend  to  be  the  patois  of  semi-civilized  negroes 
is  not  a  dream  which  allures  us  by  its  aesthetic 
charm.  Already  it  admits  its  own  intellectual 
nullity.  It  has  shed  its  economic  fallacies.  It  has 
dropped  the  argument  from  material  advantage. 
It  stands  frankly  on  a  basis  of  sheer  sentimen- 
tality." {The  Nation,  London,  March  16,  1912.) 
The  Hidden  Trail  of  Diplomacy 

Through   all  these   matters   of  colonial  expan- 


THE  HIDDEN  TRAIL  137 

sion,  there  runs  a  sinuous  trail  of  diplomatic  in- 
trigue. The  secret  treaty  ^  is  the  bane  of 
Europe,  because  the  people  have  no  control  over 
it,  and  its  existence  is  made  known  only  through 
its  unpleasant  reactions.  In  physics  it  is  rec- 
ognized that  a  current  of  electricity  will  set  up 
counter  currents  in  conducting  bodies  which  lie 
parallel  to  it.  Something  of  this  kind  takes  place 
with  the  currents  of  intrigue.  Parallel  with  the 
main  line  of  diplomacy  and  contrary  to  it  are 
two  other  lines,  each  of  the  same  nature  as  the 
first. 

The  main  trail  leads  from  Berlin  to  Vienna, 
then  down  the  Adriatic  and  through  the  Balkan 
capitals  to  Constantinople.  Here  effort  centers 
in  the  Great  Bagdad  Railway  with  its  direct 
threat  at  India,  to  which  it  is  much  the  shortest 
route,  and  its  indirect  menace  to  Egypt  on  the 
one  hand  and  to  Persia  on  the  other.  This  great 
military  highway  built  by  a  German  Syndicate  on 
a  concession  from  the  Turkish  Government  to  the 
German  Empire  was  to  lead  across  the  Taurus 
IMountains  down  the  rich  but  wasted  valley  of  the 
Euphrates,  past  Bagdad,  Nineveh  and  Babylon 
to  the  Persian  Gulf. 

To  the  eastward  runs  another  hidden  line  of 
intrigue  from  St.  Petersburg  across  the  Caucasus, 

5  One  of  the  wisest  provisions  of  the  Constitution  of  the 
United  States  is  that  requiring  confirmation  of  treaties  by 
the  open  vote  of  the  Senate.  This  involves  delay,  an  ele- 
ment of  safety,  and  it  insures  publicity,  which  makes 
diplomatic  intrigue  an  impossibility. 


138  UNSEEN  EMPIRE 

involving  Persia,  Turkestan,  Mongolia,  North 
Manchuria,  and  whatever  else  is  exploitable  along 
the  whole  Russian  frontier.  To  the  westward,  a 
similar  line  of  secret  agreements  extends  from 
London  to  Paris,  Rome  and  Athens  and  across 
to  Delhi,  cooperating  at  times  with  the  under- 
ground schemes  of  Russia  and  at  all  times  crossing 
and  thwarting  the  secret  designs  of  Germany. 
Two  lines  of  intrigue  met  at  Morocco,  and  in  the 
arrangements  of  both  it  seems  to  be  agreed  that 
Italy  for  her  part  should  at  her  convenience  take 
possession  of  Tripoli.  In  the  one  stroke  of  the 
annexation  of  the  half-forgotten  principality  of 
Koweit,^  the  diplomacy  which  we  may  call  British 

G  The  essential  facts  in  the  Koweit  affair  are  as  follows: 
The  Sultan  Abdul-Hamid  had  granted  to  the  government 
of  Germany  a  concession  of  land  on  which  to  build  a  rail- 
way from  Constantinople  diagonally  across  Turkey  to  the 
Persian  Gulf.  This  would  cross  the  Taurus  Moun- 
tains to  Adana  and  Aleppo,  then  proceed  to  Nineveh 
on  the  Tigris,  thence  to  Bagdad  and  Babylon  to 
Koweit.  The  concession  also  included  navigation  rights  on 
the  Tigris,  Euphrates  and  Shat-cl-Arab,  besides  access  to 
the  richest  of  oil  lands  and  of  wheat-fields  in  the  Valley  of 
Mesopotamia.  Koweit,  on  the  Persian  Gulf,  is  an  "insig- 
nificant cluster  of  mud  huts."  Its  Sheik,  a  half-independ- 
ent Arab  vassal  of  the  Sultan,  was  visited  some  years  ago 
by  a  British  officer.  According  to  report  the  gunboat 
which  brought  him  from  India  was  generously  provided 
with  presents,  as  well  as  with  flagstaffs  and  the  Union 
Jack.  It  did  not  take  long  to  persuade  the  Sheik  that  it 
was  for  his  advantage  to  come  under  British  protection.  In 
this  fashion  was  Koweit  annexed  to  the  British  Empire. 
Thereupon  the  German  Foreign  Office  was  promptly  noti- 
fied that  the  terminus  of  the  Bagdad  Railroad  would  be 
on   British  soil.     It  was  therefore  suggested   that  the  road 


THE  HIDDEN  TRAIL  139 

achieved  a  distinct  advantage,  unless  we  count 
the  sacrifice  of  moral  values  involved  in  assisting 
at  the  loot  of  Persia.  Koweit  constitutes  the  only 
possible  terminus  for  the  Bagdad  Route  and  when 
it  passed  under  the  British  flag  the  costly  rail- 
way was  halted  "^  at  the  Taurus  Mountains.  By 
further  consenting  to  the  effacement  of  Persia, 
England  has  saved  that  nation  from  the  danger 
of  German  domination  by  turning  her  over  bodily 
to  the  military  despotism  of  Russia.  For  it  is 
claimed  that  a  self-governing  Persia  "would  be 
simply  a  plum  to  be  picked  by  the  owner  of  the 
Bagdad  Railway  at  his  convenience."  A  second- 
ary ramification  of  diplomacy  is  the  fair-weather 
alliance  with  Japan.  Another  is  the  zeal  for  con- 
scription aroused  in  Australia  and  New  Zealand. 

be  made  neutral,  British  and  Germans  to  share  in  its  man- 
agement and  construction.  Work  was  immediately  stopped 
and  the  line  still  extends  no  farther  than  Eregli,  in  the 
Taurus  Mountains.  If  completed  it  would  form  a  route 
to  India  much  shorter  than  that  by  the  Suez  Canal.  It 
was  therefore  regarded  as  a  "military  menace"  to  the 
British  occupation  of  India,  as  well  as  to  Egypt  and  Persia. 
It  is  not  easy  for  a  layman  to  see  any  reality  in  this  al- 
leged "menace."  Besides  the  reasons  for  believing  that  a 
war  between  Great  Britain  and  Germany  is  impossible,  we 
have  the  difficulties  involved  in  a  ver\-  long  range  attack  on 
an  entrenched  antagonist.  The  German  army  would  be 
needed  at  home.  If  ever  an  attack  were  to  have  been  made 
on  England,  it  would  seem  as  if  the  time  of  the  Boer  war 
offered  tiic  best  opportunity.  It  was  probably  morally,  as 
well  as  financially,  impossible  then,  as  we  trust  that  it  is 
to-day. 

7  In  essentially   the  same   fashion,  the  British   "Cape-to- 
Cairo"  line  has  been  blocked  by  German  influence  in  Africa. 


140  UNSEEN  EMPIRE 

In  the  war-scares  evolved  in  these  regions,  Japan, 
four  thousand  miles  away,  is  the  only  evocable 
spectre. 

"Powers"  or  Jurisdictions? 

The  mediaeval  conception  of  a  nation,  still  ex- 
tant in  Europe,  is  that  of  a  "Power,"  its  impor- 
tance being  determined  by  the  physical  force  it 
can  exert  on  other  nations. 

Our  ultimate  conception  must  be  that  of  a  sim- 
ple jurisdiction  either  as  an  individual  unit  or 
else  as  composed  of  confederated  states.  In  this 
view,  the  boundary  line  represents  merely  the 
limit  of  jurisdiction.  That  jurisdiction  ceases 
does  not  imply  probability  of  violence  between  the 
people  on  the  two  sides  nor  require  fortification 
for  the  purpose  of  repelling  violence.  The  Cana- 
dian boundary  is  an  example  of  this  meeting  of 
states  not  as  powers  but  as  jurisdictions. 

This  four-thousand-mile  line,  ranging  through 
all  kinds  of  territory  and  all  sorts  of  conditions, 
disputed  nearly  all  the  way  "with  all  the  brutal 
frankness  common  to  blood  relations,"  ^  has  for 
nearly  a  hundred  years  not  known  a  fortress,  a 
soldier,  a  warship  or  a  gun.  It  is  a  peace  bound- 
ary, the  limit  of  the  jurisdiction  of  one  self-gov- 
erning nation,  the  beginning  of  that  of  another. 
It  lacks  but  one  thing  to  make  it  ideally  perfect, 
the  removal  of  the  custom-house,  the  emblem  of 
national  suspicion  and  greed,  the  remnant  of  the 

8  Dr.  James   A.   MacDonald. 


GERMANY  A  CASE  141 

days  when  it  was  considered  good  economics  for  a 
nation  to  "have  its  taxes  paid  by  foreigners." 
Entirely  similar  to  this  in  all  regards  is  the  long 
boundary  of  Mexico.  This  we  have  to  defend,  it 
is  true,  not  against  Mexicans  but  against  the 
predatory  excursions  of  our  own  law-breakers. 

The  states  in  a  federal  union  meet  as  jurisdic- 
tions. The  small  ones  have  no  fear  of  the  large 
ones  and  those  not  touching  the  sea  suffer  in  no 
way  from  their  restricted  position.  A  "Power" 
hampered  as  is  the  state  of  Illinois  would  chafe 
against  its  limitations,  and  its  jingoes  would  talk 
of  fighting  their  way  to  the  ocean.  But  viewed  as 
a  jurisdiction,  surrounded  by  similar  jurisdictions, 
the  people  of  Illinois  have  no  consciousness  of  their 
limitation. 

Germany  a  Case  in  Point 

Viewed  as  a  "Great  Power,"  in  the  mediaeval 
fashion,  the  German  Empire  is  hampered  on  every 
side.  Her  scant  sea-coast  is  split  in  two  by  the 
presence  of  Denmark.  Her  German  Rhine  dis- 
charges itself  through  Holland.  The  ports  of 
Amsterdam,  Rotterdam,  Antwerp  and  Ostend, 
geographically  hers,  are  occupied  by  alien  peo- 
ple whom  she  could  crush  out  in  a  moment,  were  it 
not  for  the  physical  force  of  the  rest  of  Europe 
and  the  moral  force  of  the  world.  Of  Poland, 
she  has  too  much  or  too  little.^     A  large  part  of 

0  "Wir  halicn  Polen  penue:  nuf  dem  Wapen."  (A  German 
Journal.) 


142  UNSEEN  EMPIRE 

the  German  people  live  in  the  alien  empire  of 
Austro-Hungary  and  in  the  republic  of  Switzer- 
land, while  after  forty  years  of  possession,  she 
scarcely  owns  Alsace  or  Lorraine.  She  is  hemmed 
in  everywhere  by  the  scars  of  old  struggles,  to 
her  perennial  discomfort.  For  this  reason,  she 
suffers  from  the  "Drang  nach  Ostcn,"  she  seeks  a 
road  to  the  Persian  Gulf,  an  empire  over  seas, 
and  every  form  of  imperial  extension  to  lands 
"under  the  sun,"  which  may  for  the  moment  seem 
plausible  or  possible. 

But  Germany  as  a  jurisdiction  suffers  none  of 
these  limitations.  Her  powers  are  only  those 
which  are  needed  for  the  people's  good.  They  are 
merely  her  public  duties.  It  matters  nothing 
that  her  sway  is  checked  on  almost  every  side  be- 
fore it  reaches  the  sea.  Other  jurisdictions  in- 
tervene, and  each  of  these  looks  after  the  public 
needs  of  man,  which  are  mostly  justice,  conser- 
vation, education,  sanitation  and  peace.  As  one 
of  the  "Great  Powers"  of  the  world,  Germany 
(with  her  fellow  states  as  well)  is  a  center  of  fric- 
tion, injustice  and  unrest.  Viewed  as  a  jurisdic- 
tion, the  administration  of  Germany  is  worthy  of 
the  highest  praise,  and  no  enlargement  of  bound- 
aries would  enhance  her  usefulness.  When  the 
nations  cease  to  be  "Powers,"  great  and  small, 
and  become  fellow-citizens  of  a  civilized  world,  this 
fact  will  mark  the  reign  of  peace. 

The  power  and  extent  of  a  nation  bear  no  re- 
lation to  its  prosperity,  that  is,  to  the  welfare  of 


RIVAL  "POWERS"  143 

its  individual  citizens,  except  as  the  debt  and 
waste  through  which  "power"  establishes  itself 
may  be  harmful  to  the  people  of  which  the  nation 
is  composed.  "There  is  no  welfare  of  a  nation 
apart  from  the  well-being  of  its  people."  ^'^ 

England  and  Germany  as  Rival  "Powers" 

A  conspicuous  example  of  the  rivalry  engen- 
dered between  great  nations  still  viewed  as  "Pow- 
ers" is  found  in  the  present  relations  of  England 
and  Germany.  Between  these  nations  as  intelli- 
gent, civilized  and  progressive  peoples  there  is  no 
reason  for  enmity.  As  a  matter  of  fact,  except 
as  an  aftermath  of  war  scares  and  serpentine  di- 
plomacy no  such  enmity  exists.  No  responsible 
person  on  either  side,  King,  Kaiser,  Reichstag  or 
Parliament,  desires  war.  All  realize  that  a  fight 
between  these  two  most  powerful,  most  deter- 
mined and  most  advanced  of  nations  would  in- 
volve the  entire  world  in  indescribable  calamity. 
And  we  know  that  the  whole  influence  of  com- 
merce, of  labor,  of  education  on  both  sides  is  un- 
alterably opposed  to  armed  conflict.  Behind  all 
this,  as  we  believe,  the  Unseen  Empire  of  Finance, 
the  natural  order  of  business,  has  decided  that 
such  a  conflict  shall  never  take  place. 

Nevertheless,  the  old  idea  of  the  function 
and  duties  of  a  "Power,"  with  its  burden  of  debt, 
its  necessity  for  armament  and  its  mischief-mak- 
ing diplomacy,  has  kept  these  two  nations  for 
years  on  the  apparent  verge  of  war.  Some 
lOEikichi  Kumada,  President  of  Keio  University,  Tokyo. 


144  UNSEEN  EMPIRE 

phase  of  this  menace  will  endure  until  we  clarify 
the  common  conception  of  what  a  nation  is  for. 

Why  Talk  of  War? 

The  trouble  in  each  nation  comes  from  the  al- 
leged wickedness  of  its  neighbors.  Each  tells  the 
same  story,  "The  waning  fleet  of  England  is  tied 
to  its  shores  by  German  menace" ;  "The  small 
but  efficient  fleet  of  Germany  is  solely  for  defense 
of  Germany's  growing  commerce."  More  ex- 
plicitly, on  INIarch  16,  1911,  there  was  prepared 
the  following  statement  signed  by  Eickhoff, 
chairman  of  the  German  Committee  for  "Peace 
and  Arbitration,"  also  endorsed  by  fifty-one  mem- 
bers of  the  German  Reichstag  and  thirty-four 
members  of  the  Prussian  Diet,  as  well  as  by  the 
Count  of  Schwerin-Lowitz,  President  of  the 
Reichstag  and  by  the  Prince  of  Schoenaich- 
Caroleth. 

The  statement  (translated)   reads  as  follows: 

"It  is  the  opinion  of  the  undersigned  that  because 
of  tlie  interests  involved  in  the  close  international  in- 
terdependence existing  in  the  finance  and  commerce 
of  the  world,  Germany  holds  its  army  and  navy  in 
readiness  only  as  a  means  of  protection  against  any 
attack,  but  not  as  a  means  for  aggressive  warfare 
(nicht  aber  um  einen  Angriffskrieg  zu  fiihren)." 

In  England  it  would  be  easy  to  get  an  array 
of  distinguished  names  after  any  statement  of 
similar  tenor.  It  could  be  done  in  any  nation. 
War  is  the  last  thing  the  statesmen  want,  although 


WHY  TALK  OF  WAR?  145 

it  is  the  first  thing  for  which  they  prepare.  Nei- 
ther nation  could  gain  much  by  victory,  while  in 
the  end  there  would  be  no  material  choice  be- 
tween that  and  defeat.  The  British  would  still 
own  England,  the  Germans  Germany,  whatever 
the  trend  of  events.  Not  an  Englishman  (con- 
tractors, armament-builders  and  "ghouls"  ex- 
cepted) would  be  the  richer  for  the  downfall  of 
Germany.  Not  a  German  but  would  be  the 
poorer  for  the  destruction  of  England's  credit. ^^ 
The  toilers  of  the  world  are  everywhere  opposed 
to  war  and  to  debt.  The  Labor  Unions  are  al- 
most a  unit  in  this  regard.     The  Socialist  groups 

11  "How  far  are  we  removed  from  the  glorious  days  when 
Bismarck  could  glibly  talk  of  bleeding  France  white  with 
the  satisfactory  assurance  that  not  a  German  would  be  the 
poorer  in  consequence,  and  that  on  the  contrary  the  Ger- 
man state  would  immensely  gain  thereby."  By  "the  social 
Law  of  Acceleration  .  .  .  Bismarck  was  nearer  to 
being  able  to  apply  the  methods  of  Attila,  nearly  1,500 
years  removed  from  him,  than  we  are  to  being  able  to 
apply  the  methods  of  Bismarck,  from  whom  only  40  years 
separate  us.     .     .     . 

"But  surely  we  must  realize  that  in  the  end  the  Govern- 
ment is  the  world  of  affairs,  in  the  sense  that  the  general 
trend  of  its  policy  must  sooner  or  later  be  determined  by 
the  interests  and  the  necessities  of  the  mass  of  the  people 
from  which  it  derives  its  power,  its  money,  its  general  ca- 
pacity to  act  with  efficiency  and  precision — a  modern  war 
of  all  tilings  involves  that  capacity  which  must  be  derived 
from  acting  in  the  long  run  in  connection  with  the  great 
currents,  economic  and  moral,  of  its  time  and  people.  It 
is  not  possible  for  any  great  state  taking  an  active  part  in 
the  life  of  the  world  to  do  otherwise.  The  state  simply  is 
powerless  before  these  currents." — (Norman  Angell,  "Influ- 
ences of  Banking  on   International   Relations.") 


146  UNSEEN  EMPIRE 

take  the  same  stand  against  international  war, 
though  many  of  them  advocate  another  kind,  the 
struggle  of  "class  consciousness."  The  Social 
Democracy  of  Germany, ^^  pledged  in  opposition  to 
monarchy  as  well  as  to  militarism,  has  arisen 
as  an  inevitable  reaction  from  the  policy  of  "the 
Mailed  Fist."  As  for  the  rank  and  file,  they  are 
mere  incidents  in  the  movement  of  diplomacy ; 
not  the  principals,  merely  the  victims  or,  at  most, 
pawns  to  be  moved  in  the  game  of  national  glory. 
Hidden  forces  control  their  activities,  and  their 
lives  are  spent  to  no  purpose  known  to  themselves. 
The  Prime  Ministers  and  Ministers  of  War  are 
never  on  the  firing  line.  The  pawnbrokers,  pro- 
moters, and  camp-followers  are  also  well  to  the 
rear.  To  risk  their  own  lives  would  also  risk 
the  profits.  "The  rich  man's  war,  the  poor  man's 
fight,  this,"  says  Carl  Schurz,  "was  the  Winged 
Word"  among  the  poor  whites  of  the  Tennes- 
see mountains. 

Professional  Interest  a  Factor 

There  can  be  no  doubt  that  in  every  navy, 
many  of  the  wardroom  officers  look  beyond 
their  dreary  routine  of  futile  repetitions  to  the 
time    when    they    can    make    use    of    their    costly 

12  In  the  recent  German  election,  January  12,  1912,  the 
Social  Democrats  polled  over  seven  millions  of  votes  as 
against  less  than  five  millions  cast  by  other  parties.  In 
every  district  hut  one  in  Berlin  including  Potsdam  itself, 
they  were  successful.  The  result  is  significant  of  the  great 
reaction   in   Germany. 


PROFESSIONAL  INTEREST  147 

training.  So  in  looking  forward  to  the  day  of 
action  there  may  be  first  a  selfish  element.  War 
means  a  chance  for  promotion,  a  chance  to  rise 
from  the  nameless  roll  into  the  rank  of  the  idols 
of  the  hour. 

A  higher  impulse  arises  from  the  professional 
spirit.  When  a  man  devotes  his  life  and  energy 
to  a  calling,  he  may  naturally  wish  to  practise 
it,  in  a  degree  at  least.  It  is  true  some  of  the 
ablest  advocates  of  peace  are  found  among  men 
who  know  what  war  is  and  who  realize  that  it 
must  disappear  in  the  onward  movement  of  civ- 
ilization. But  the  average  European  officer 
feels  the  spirit  of  militarism.  He  takes  his  pro- 
fession seriously,  and  at  a  value  set  by  the  money 
expended  on  it.  For  the  cost  either  in  money  or 
in  blood,  he  cares  little.  Of  the  cost  in  money,  he 
knows  little:  he  has  nothing  to  do  with  taxes.  Of 
the  cost  in  blood,  he  knows  little  more,  only  a 
very  small  percentage  of  European  military  men 
having  ever  seen  a  battle.  MiHtarism  has  al- 
ways held  itself  superior  to  civil  affairs  and  lightly 
regarded  the  life  of  the  individual.  Napoleon  is 
reported  to  have  said :  "A  soldier  like  me  cares 
not  a  tinker's  damn  for  the  lives  of  a  million  men." 

There  exists  moreover  the  scientific  desire  to 
test,  in  some  way,  the  teaching  of  the  books  in 
military  affairs.  Changes  in  armament  mean 
great  changes  in  tactics,  but  these  have  never 
been  formulated  or  tested.  They  can  be  tested 
only  in  the  laboratory  of  actual  war.      It  is  there- 


148  UNSEEN  EMPIRE 

fore  not  strange,  and  it  is  perhaps  no  reproach 
to  the  young  officers  that  they  toast,  "Der  Tag," 
as  the  day  of  their  release  and  their  opportunity. 

A  Grotesque  of  History 

The  persistence  of  mediaeval  traditions  of  war 
and  glory  in  an  age  of  science,  commerce  and  rea- 
son has  produced  an  extraordinary  confusion  of 
effort  and  motive  without  a  parallel  in  the  history 
of  the  world.  This  condition  can  be  viewed  only 
as  a  part  of  the  necessary  stages  in  the  passing 
of  war. 

Zangwill  says,  quoting  from  a  supposititious 
future-day  Chinese  historian :  "Like  a  sloughing 
snake,  the  West  lay  sickening;  the  new  skin  of 
commercialism  only  half  put  forth,  the  old  skin 
of  militarism  only  half  put  off.  A  truly  piebald 
monster,  this  boasted  civilization  of  ours.  On 
the  one  hand,  a  federation  of  peoples  eagerly 
strengthening  one  another;  on  the  other  hand, 
packs  of  peoples  jealously  snapping  at  one 
another.  A  sextet  of  nations  styling  themselves 
Great  Powers,  all  with  vast  capitals  invested  in 
developing  one  another's  resources,  were  yet 
feverishly  occupied  in  watching  and  cramping  the 
faintest  extension  of  one  another's  dominions.  A 
more  ironic  situation  had  never  been  presented  in 
human  history,  not  even  when  Christianity  was 
at  its  apogee.  For,  whereas,  in  the  contest  be- 
tween Church  and  Camp,  it  was  simple  enough  to 
shelve  the  Sermon  on  the  INIount ;  in  the  contest 


A  GROTESQUE  OF  HISTORY        149 

between  Commerce  and  Camp  both  factors  were 
of  equal  vitality  and  insistence.  The  result  of 
this  shock  of  opposite  forces  of  development  were 
paradoxical,  farcical  even.  In  the  ancient  world 
there  had  been  the  same  struggle  for  supremacy, 
but  the  Babylonians  or  the  Egyptians  did  not 
build  up  each  other's  greatness.  The  Romans 
did  not  lend  money  to  the  Carthaginians,  nor  did 
Hannibal  sell  the  Roman  elephants.  But  in  this 
era  the  nations  fought  by  taking  up  one  another's 
war  loans.  In  lulls  of  peace  they  built  for  one 
another  the  ships  they  would  presently  be  bom- 
barding one  another  with.  The  ancient  mistress 
of  the  world  never  developed  a  country  till  it  be- 
longed to  Rome.  The  mediaeval  rival  mistresses 
were  all  engaged  in  developing  countries  which 
belonged  to  their  rivals,  or  to  which  they  might 
one  day  themselves  belong.  In  brief,  two  threads 
of  social  evolution  had  got  tangled  up  and  tied 
into  a  knot,  so  that  ncitlicr  thread  could  be  fol- 
lowed clear]}'.  It  was  death  to  give  away  your 
country's  fortifications — at  a  percentage.  It 
was  high  treason  to  help  the  enemy  in  war  time, 
but  you  could  sell  him  your  deadliest  inventions 
if  your  Government  offered  less  or  waived  you 
aside.  And  you  manufactured  those  weapons 
and  exported  them  to  the  enemy  by  the  million 
so  long  as  he  had  not  given  you  notice  that  he 
was  going  to  fight  you  next  week.  Quite  often 
a  nation  was  hoist  with  its  own  petards  and  no 
sooner  had  you  devastated  your  enemy's  country 


150  UNSEEN  EMPIRE 

than  you  lent  him  money  to  build  it  all  up  again. 
In  vain  shells  hissed  and  dynamite  exploded. 
The  stockbroker  followed  ever  on  the  heels  of  the 
soldier  and  the  grass  of  new  life  (and  new  loans) 
sprang  up  over  the  blackened  ruins.  Indeed,  na- 
tions, instead  of  being  extinguished  in  the  strug- 
gle for  political  existence,  because  they  were  too 
weak  to  pay  their  debts,  had  to  be  kept  artifici- 
ally alive  in  order  to  pay  them.'* 


VIII.     RETRENCHMENT 

In  these  pages  we  have  tried  to  indicate  the 
present  relations  of  the  nations  to  war  and  peace. 
We  have  shown  how  peace  has  followed  in  the 
wake  of  debt,  and  how  the  rule  of  the  war-lord 
has  given  place  to  that  of  the  money-lender,  and 
this  in  turn  to  the  operation  of  the  ordinary  laws 
of  finance.  We  have  shown  that  nations  have 
lived  beyond  their  means  to  a  degree  that  cannot 
be  permanent.  We  shall  further  see  that  the 
demands  of  peace  must  arise  to  contest  with  war 
the  right  to  "the  fruits  of  progress."  The  way 
into  debt  lay  through  heedless  extravagance. 
The  way  out  lies  through  a  reversal  of  policy, 
a  return  to  forethought  and  frugality. 

Functions  of  Government 

Until  well  along  in  the  nineteenth  century,  war 
and  diplomacy  constituted  practically  the  sole 
business  of  government.  The  force  of  tradition 
still  gives  them  the  right  of  way  in  almost  every 
country.  The  present  organization  of  every 
government  in  the  world  is  based  on  the  mediaeval 
theory  ^  that  war  is  a  natural  function  of  a  na- 
tion,  not   a    moral,   physical   and   financial   catas- 

1  The  conception  was  thus  formulated  by  Machiav- 
elli:  "A  prince  ought  to  have  no  other  aim  or  thought, 
nor  select  anything  else  for  his  study  than  war  and  its 
rules  of  discipline,  for  that  is  the  sole  art  that  belongs  to 
him  that  rules." 

151 


152  UNSEEN  EMPIRE 


trophe.  In  our  own  country,  the  President  is 
Commander-in-chief  of  Army  and  Navy,  with  a 
Secretary  of  each  in  his  Cabinet.  It  is  not 
humanly  possible  for  any  one  of  these  three  to 
reduce  the  range  of  power  his  office  represents. 
In  almost  all  other  nations  the  force  of  militarism 
is  still  more  dominant.  For  these  reasons,  com- 
peting civil  interests  have  never  been  able  ade- 
quately to  establish  themselves  anywhere.  The 
sums  devoted,  the  world  over,  to  all  civil  pur- 
poses range  in  amount  from  one-fifth  to  less  than 
one-half  those  devoted  to  military  affairs. 

A  remed}'  for  all  this  lies  in  the  exaltation 
of  the  civil  functions  of  government,  the  safe- 
guarding of  the  common  rights  and  interests  of 
men  in  the  promotion  of  justice,  sanitation  and 
education  and  in  the  conservation  of  public 
properties,  together  with  the  fostering  in  all  ef- 
fective ways  of  art,  science  and  invention.  Posi- 
tive efforts  along  these  lines  rather  than  direct 
attacks  on  the  waste  of  militarism  may  indicate 
the  way  out.  The  fonnation  of  a  high  commis- 
sion which  in  statesmanlike  fashion  can  consider 
actual  facts  in  the  scheme  of  national  defense, 
with  the  relative  values  of  those  needs  on  which 
money  may  be  expended,  will  give  the  surest  solu- 
tion of  our  problem  in  America. 

Expenses  Unchecked 

One  of  the  most  disheartening  features  in  popu- 
lar government  everywhere  is  the  absence   of  all 


EXPENSES  UNCHECKED  153 

machinery  to  check  expense.  Even  an  empty 
treasury  does  not  count.  There  is  always  some 
way  to  negotiate  a  loan.  This  absence  of  check 
is  especially  notable  in  the  case  of  the  army  and 
navy.  Their  expert  demands  are  beyond  the 
understanding  of  the  common  man.  By  minis- 
tries and  parliaments  their  estimates  are  accepted 
practically  without  question.  No  finance  minister 
anywhere  has  thus  far  maintained  himself  against 
them,  with  the  single  exception  of  Yamamoto  in 
Japan. 

The  "watchdog  of  the  treasury"  receives  no 
support  from  his  fellows  or  his  constituents,  and 
his  work  for  retrenchment  marks  him  for  political 
extinction.^     Thus    it    happens    that    the   United 

2  This  is  illustrated  in  the  recent  experience  of  Wermuth 
in  Germany:  "But  the  guardian  of  the  finances  of  the 
Empire,  Herr  Wermuth,  has  gone,  without  a  word  of 
thanks  for  his  services  from  his  Imperi  master.  .  .  . 
The  civilian  goes  and  the  warrior  remains.  There  is  some- 
thing symbolical  in  this  for  the  political  situation  of  Ger- 
many and  of  the  world  of  so-called  Great  Powers.  .  .  . 
The  true  reason  of  Herr  Wermuth's  resignation  lies  deeper. 
It  is  not  the  dispute  about  one  particular  tax.  Enough  lias 
leaked  out  to  make  it  evident  that  the  whole  system  of 
spending  money  and  preparing  further  expenditure  as 
practised  at  ])resent  has  found  a  decided  opponent  in  the 
former  Chancellor  of  the  Exchequer.  He  was  certainly 
not  in  ])rinciple  an  antagonist  of  armaments;  but  he  appears 
to  have  fought  strongly  against  the  reckless  increase  of  ex- 
penditure on  them.  .  .  .  The  story  of  the  naval  mad- 
ness in  Germany  furnishes  an  instructive  example  of  how 
certain  ))!ants  themselves  create  the  conditions  of  their 
growth.  With  the  increase  of  the  Gt'rman  navy,  the  num- 
ber of  officers  of  the  navy  has  increased  too,  so  that  to-day 
perhaps  five  or  eight  times  more  middle-class  families  have 


154  UNSEEN  EMPIRE 

States  in  time  of  peace,  with  nothing  save  peace 
ahead,  spends  $800,000  a  day  in  military  opera- 
tions,— not  counting  interest  and  the  removal  of 
men  from  productive  enterprise.  No  clear  evi- 
dence of  the  need  of  this  has  ever  come  before 
the  people.  The  world  over,  as  we  have  shown, 
each  nation  finds  itself  in  the  same  ruinous  com- 
petition, with  the  same  ignorance  of  any  reason 
why  these  conditions  should  exist. 

It  is  a  reproach  to  the  people  of  China  that, 
suffering  as  they  have  for  ages  from  the  mis- 
use of  irresponsible  power  and  from  the  form  of 
taxation  known  as  the  "squeeze,"  they  have  until 
lately  never  attacked  the  S3'stem,  rising  only  at 
intervals  against  the  individuals  who  have  abused 
it.  The  same  reproach  holds  against  the  people 
of  Europe.  They  have  floundered  for  a  century 
in  the  morass  of  debt,  war-waste  and  poverty, 
but  while  there  have  been  bread-riots  and  tax 
riots,  strikes,  "sabotage"  and  "syndicalism,"  the 
people  have  made  no  adequate  stand  against  the 

sons  or  near  relatives  in  the  na\y  than  fifteen  years  ago, 
and  consequently  take  a  miu'h  larger  and  more  direct  in- 
terest in  all  questions  referring  to  it.  This  accounts  also 
for  the  small  resistance  offered  by  the  middle  classes  to 
the  proposed  increase.  Hence  the  only  quarrel  of  the  mid- 
dle class  parties  in  regard  to  this  question  relates  to  the 
method  of  paying  for  it."  (Ed.  Bernstein,  London  Nation, 
March,  1912.)  With  each  expansion  of  naval  armament 
goes  a  corresponding  extension  of  the  niiml)ers  of  those 
consciously  or  unconsciously  interested  in  promoting  naval 
expenditure,  and  this  influence  is  cast  on  the  side  of  still 
greater  debt  and  waste. 


RETRENCHMENT  155 

system  of  military  expenditure  which  is  one  of  the 
primal  sources  of  economic  troubles. 

The  United  States  and  Retrenchment 

The  recent  "Pageant  of  the  Ships"  on  the  Hud- 
son River  was  regarded  by  some  of  us  as  a  mighty 
illustration  of  the  force  of  a  free  people,  a  great 
awakener  of  patriotism,  and  a  glory  of  democ- 
racy. To  others  it  represented  the  most  costly 
monument  ever  reared  to  the  spirit  of  heedless 
Avaste.  There  is  perhaps  some  middle  ground 
on  which  we  may  meet. 

No  one  may  question  the  necessity  for  a  small 
but  effective  army  and  a  navy  also  small  but 
with  the  best  of  necessary  equipment.  There  is 
certainly  some  justification  for  protecting  our 
great  coast  cities,  but  many  of  us  see  no  reason 
for  fortifying  the  Panama  Canal  nor  the  port  of 
Honolulu.  There  is  no  nation  on  earth  that  has 
either  the  will  or  the  money  to  attack  us.  On 
the  other  hand  we  see  in  international  friend- 
ship, international  commerce  and  freedom  from 
international  debt,  weapons  stronger  than  any 
fortress  or  navy.  If  in  America  we  can  safely 
retrench,  if  we  ought  to  retrench  and  dare  to 
retrench,  it  will  ultimately  solve  for  the  world  the 
whole  problem   of  debt  and  militarism. 

Let  us  consider  this  matter  somewhat  in  de- 
tail. Civil  wars  aside,  our  nation  has  been  three 
times  engaged  in  war,  each  time  of  its  own  ini- 
tiative.    Leaving  out  the  War  of  1812,  in  some 


156  UNSEEN  EMPIRE 

degree  an  aftermath  of  the  Revolution,  we  have 
only  the  wars  with  Mexico  and  with  Spain.  The 
Mexican  war  no  one  now  pretends  to  justify. 
It  was  an  affair  of  spoliation  in  the  interests 
of  slavery.  That  beneficent  results  followed  in 
no  way  justifies  its  purpose. 

The  primary  motive  in  our  differences  with 
Spain  was  one  of  sympathy  for  a  much  abused 
people.  The  usual  processes  of  "military  pacifi- 
cation" ^  familiar  in  Asia  and  Africa  and  going 
on  to-day  in  Persia,  Armenia  and  other  unfor- 
tunate regions,  were  being  practiced  at  our  own 
doors.  It  was  natural  and  righteous  to  protest. 
But  this  need  not  have  involved  war.  It  certainly 
did  not  involve  war,  for  it  is  a  matter  of  record 
that  before  war  was  declared,  our  IMinister  to 
Spain  had  secured  assent  to  a  treaty  granting 
all  we  had  a  right  to  ask,  all  in  fact  that  we 
did  ask, — namely  full  autonomy  to  Cuba  and 
arbitration  of  all  differences,  including  the  dis- 
aster of  the  Maine. 

3  For  a  statement  of  fkcts  as  to  "military  pacification" 
in  some  other  regions  see  "Bella !  Bella !  Horrida  Bella," 
a  masterpiece  of  moral  indignation,  by  Mr.  F.  J.  Corbet, 
in  the  Westminster  Review,  March,  190:;?.  Also  "Pax 
Britannica  in  South  Africa,"  by  Francis  P.  Fletcher-Vane, 
and  "The  Captain  Sleeps,"  in  the  present  author's  "Im- 
perfal  Democracy."  For  the  close  relation  between  a  stand- 
ing army  and  the  "Wiiite  Slave  Traffic,"  see  "Queen's 
Daughters  in  India,"  by  Elizabeth  Andrews  and  Kather- 
ine  Bushnell,  and  also  Mr.  Corbet's  article  mentioned  above. 
See  also  "Indiscreet  Letters  from  Peking,"  by  B.  L.  Put- 
nam Weale.  "History,"  says  Mr.  Weale,  "is  made,  only 
to  be  immediately  forgotten." 


RETRENCHMENT  157 

Whatever  else  we  may  say  of  that  war,  we  can- 
not assert  that  before  it  began,  we  were  exposed 
to  the  clanger  of  Spanish  aggression. 

We  are  not  exposed  to  aggression  from  any 
quarter.  As  the  wealthiest  nation  on  earth,  we 
have  business  allies  in  every  capital.  In  spite  of 
our  tariffs,  we  are  the  world's  best  customer. 
Unlike  the  great  nations  of  Europe,  we  have  not 
overdrawn  our  accounts.  W^e  spend  as  much  each 
year  as  the  best  of  them — or  the  worst — but 
our  debt  is  small  and  our  reserve  surplus  is  gigan- 
tic. If  we  had  no  navy  whatever,  no  nation  could 
afford  to  attack  us.  For  we  are  protected  in 
isolation,  in  wealth,  in  relative  freedom  from  debt, 
in  the  absence  of  entangling  alliances  and  entan- 
gling enmities,  in  having  no  fallen  dynasties  to 
restore  and  no  defeats  to  avenge,  in  being — as 
a  whole — fully  competent,  through  commerce, 
through  industry,  through  alliance  by  blood  and 
alliance  of  friendship  to  banish  all  consideration 
of  war. 

INIoreovcr,  the  United  States  has  a  defense  in 
her  moral  strength,  an  influence  strained  a  few 
times  to  be  sure  by  lapses  real  or  apparent,  yet  on 
the  whole  persistent  and  potent.  To  have  stood 
fairly  consistently  for  peace  and  fair  play  is  in 
itself  a  guarantee  against  wanton  attack  even 
if  we  had  no  other  defense.  Were  the  United 
States  to  make  war  on  any  power  of  Europe 
(a  wholly  absurd  proposition),  it  could  not  under 
present  conditions   invade   the    enemy's   territory, 


158  UNSEEN  EMPIRE 

nor  inflict  much  damage  on  its  people  or  its 
property.  The  United  States  in  wealth,  popula- 
tion and  resources  stands  far  above  the  strongest 
of  the  European  powers,  but  she  could  not  suc- 
cessfully attack  any  of  them  on  their  own  ground. 
Conditions  of  warfare  have  changed  since  the  days 
of  Napoleon,  and  Napoleon  fought  on  land  be- 
cause by  his  own  avowal  he  could  not  control  the 
sea.  The  most  the  United  States  could  do  was 
exemplified  in  the  war  with  Spain.  She  could, 
pirate-fashion,  capture  a  few  merchant  ships,  do- 
ing some  injury  to  her  enemy's  commerce  and  to 
her  own  (carried  mostly  in  European  bottoms) 
and  she  might  dislodge  the  occupants  of  a  remote 
dependency.  All  of  which  is  based  on  the  imag- 
inary possibility  that  this  nation  may  again  for- 
get herself  and  resort  to  the  crude  and  brutal  ar- 
bitrament of  war,  when  so  many  other  ways  are 
simpler,  cheaper  and  more  honorable. 

Furthermore,  under  any  conditions,  the  United 
States,  with  or  without  a  navy,  is  in  its  turn  effect- 
ively defended  against  any  attack  from  Europe. 

In    a    recent    article,^    Captain    Alexander    G. 

McClellan,      an      English      authority,      expresses 

strongly    his   belief   that   naval   expenditure   is   a 

menace  to  the  nation  responsible  for  it  and  that 

the  United  States,  for  example,  would  be  amply 

defended  against  any  attack  from  Europe,  even 

with  no  navy  at  all. 

*  A     British     View     of     American     Naval     Expenditure, 
Atlantic  Monthly,  January,   1911. 


RETRENCHMENT  159 

The  whole  coast-line  is  admirably  adapted  for 
defense  and  our  important  harbors  are  protected 
by  shore  guns  which  no  fleet  could  face  or  silence. 
Even  should  these  fail,  no  fleet  would  dare  enter 
a  harbor  guarded  by  submarine  vessels,  torpedoes 
and  floating  mines,  with  purposely  misplaced 
buoys  and  beacons.  No  city  of  importance  stands 
on  an  unprotected  bay,  and  no  enemy's  squadron 
would  waste  its  precious  strength  on  fishing  vil- 
lages and  seaside  resorts.  No  nation  could  main- 
tain a  successful  blockade  and  none  could  do  much 
damage  in  the  robbery  of  our  merchant  ships, 
because  most  of  these,  thanks  to  our  protective 
shipping  laws,  already  fly  the  British  or  the  Ger- 
man flag.  For  any  nation  to  land  and  maintain 
an  army  on  our  shores,  as  Captain  McClellan 
clearly  shows,  is  quite  impossible.  "The  nation 
which  could  fight  a  war  like  the  Civil  War,  with- 
out even  a  standing  army  worth  speaking  of  and 
divided  against  itself,  has  little  to  fear  from  any 
army  of  invasion,  even  though  it  should  gain 
admittance  into  the  country." 

Captain  McClellan  further  observes :  "My 
arguments  are  logical,  and  therefore  I  ask:  Is 
America  justified  in  spending  about  $150,000,000 
yearly  on  her  navy,  when  the  most  powerful  antag- 
onist that  we  can  put  against  her  cannot  do  dam- 
age enough  to  require  that  sum  to  set  it  right 
again,  in  one  year?     I  think  not !     .      .     . 

"But  the  question  whether  the  American  fleet 
could  be  dcstroved  or  not,  could  not  in  the  least 


160  UNSEEN  EMPIRE 

affect  the  final  result,  when  one  takes  into  con- 
sideration the  infinitesimal  amount  of  damage 
which  an  enemy's  fleet  could  do,  were  there 
no  American  fleet  on  the  spot  to  stop  it.  That 
small  damage  in  no  way  justifies  America's  pres- 
ent naval  expenditure,  or  even  the  existence  of 
her  navy  at  all. 

"Nothing  in  the  world  can  justify  America  in 
building  a  fleet  strong  enough  to  tackle  Japan 
single-handed  on  the  Pacific,  or  a  fleet  strong 
enough  to  tackle  single-handed  any  European 
naval  power  on  the  Atlantic.  It  would  mean 
keeping  her  navy  up  to  a  two-  or  three-power 
standard  all  the  time.  Will  American  extrava- 
gance run  to  this.''  If  not,  why  play  at  owning 
a  navy  to  satisfy  vanity.''  Why  pay  away  one 
hundred  and  fifty  millions  of  dollars  a  year  on  the 
navy  when  it  is  practically  helpless,  because  it 
lacks  the  vital  support  of  a  merchant  marine.'' 
The  all-around-thc-world  trip  which  an  American 
fleet  made  a  couple  of  3'ears  ago  would  have  been 
an  impossibility  without  the  help  afforded  by 
British  and  German  colliers.  Not  one  American 
merchant-Jack's  ensign  could  be  seen  in  attend- 
ance on  the  naval  ships  during  the  whole  cruise. 
This  was  commented  upon  by  the  chief  in  com- 
mand— Admiral  Evans.  Not  very  palatable 
reading,  is  it.''  Remember,  it  applies  to  the 
country  with  the  finest  navigable  coasts,  harbors, 
and  rivers  in  the  world ! 

"There  is  still  another  important  point  of  view 


RETRENCHMENT  161 

to  consider,  and  it  is  this:  Britain's  and  Ger- 
many's merchant  marines  are  chiefly  composed  of 
deep-water — foreign-going — ships,  while  American 
merchant  ships  are  chiefly  engaged  in  the  coastal 
and  inter-coastal  trade.  Again,  Britain  depends 
upon  her  merchant  ships  for  the  means  to  live ; 
America  does  not.  In  case  of  war  and  blockade, 
her  coasters  could  tie  up  in  harbor,  coil  down 
their  ropes,  and  wait  for  peace.  The  work  they 
do  could  be  carried  on  by  railroads. 

"Turn  now  to  American  commerce.  Here  lies 
another  great  advantage  of  America.  She  can 
afford  to  stand  by  and  snap  her  fingers  at  any  na- 
tion, no  matter  what  the  size  of  its  navy.  In  the 
first  place,  her  position  as  a  producer  makes  her 
absolutely  independent  of  all  nations:  other  na- 
tions must  come  to  her,  and  not  she  to  them,  for 
necessities.  This  being  the  case,  she  is  in  a  posi- 
tion to  retaliate  without  firing  a  shot,  should 
offensive  measures  be  taken  against  her.  Again, 
where  two  such  countries  as  Britain  and  Germany 
depend  upon  America  for  the  employment  of  a 
great  part  of  their  shipping,  war  with  either  is  a 
remote  possibility.  America,  not  owning  a  deep- 
water  merchant  marine,  need  fear  no  captures  or 
destruction  in  this  direction.  Should  America 
carry  on  a  war  with  Germany,  what  would  hap- 
pen to  her  over-sea  commerce?  Simply  nothing! 
During  these  times  of  too  much  merchant  ton- 
nage, British  ships  would  be  only  too  glad  to 
take  American  products  anywhere ;  and  so  would 


162  UNSEEN  EMPIRE 

German  vessels  in  case  of  an  Anglo-American 
war.  Thus  we  see  that  if  America  went  to  war 
with  either  country,  the  damage  would  be  con- 
fined to  a  few  unimportant  towns  on  the  coast, 
and  her  over-sea  commerce  would  reach  its  des- 
tination just  as  merrily  as  ever.  Peace  also  has 
its  victories,  and  the  country  which  warred  with 
America  would  find  that  after  war  had  ceased, 
her  ships  would  have  little  left  to  pick  up  in  the 
way  of  cargo.  A  revival  of  old  trade  relations 
would  not  come  with  the  declaration  of  peace, 
but  it  would  take  years  of  keen  competition  to  re- 
gain the  lost  ground. 

"Would  it  not  be  better  if  America  voted  less 
on  naval  ships  and  just  a  little  on  merchant 
ships.''  The  latter  would  bring  millions  into  the 
treasury,  while  the  former  only  take  millions  out. 
It  would  prove  a  profitable  investment,  I  am  sure. 

"If  in  the  march  of  civilization  we  need  the  help 
of  battle-ships  and  12-inch  guns,  then  I  say  that 
our  civilization  is  rotten,  and  will  not  last.  I  am 
confident  that  the  day  is  not  far  off  when  the 
people  of  America,  at  least,  will  oppose  the  need- 
less waste  of  millions.  The  preparations  for  war 
which  need  never  come  about,  only  suggest  child- 
ish folly  which  must  be  thrown  aside. 

"  'Mailed  fists'  and  huge  standing  armies  and 
navies  are  out  of  date.  ...  As  a  plain 
sailor  wlio  has  seen  all  the  mighty  navies  of  the 
world,  I  say  in  plain  language  that  they  stand 
only  to  mock  us  and  prove  our  civilization  a  sham. 


RETRENCHMENT  163 

The  man  in  America,  or  even  in  Europe, 
who  thinks  that  this  craze  can  last,  or  is  bound  to 
culminate  in  a  war,  has  a  poorer  opinion  of  his 
fellow  men  than  I  have." 

From  these  and  other  considerations,  it  is  evi- 
dent that  no  foreign  nation  could  inflict  on  the 
United  States  an  injury  comparable  to  the  cost 
of  the  present  upkeep  of  the  American  Nav}'.  It 
is  also  evident  that  a  nation  attacking  the  United 
States  would  work,  through  derangement  of 
finance  and  commerce,  an  injury  to  itself  greater 
than  it  could  inflict  on  us. 

We  have  next  to  inquire  from  what  direction 
we  may  expect  attack.  We  are  on  the  best  of 
terms  officially  with  every  nation.  No  nation 
for  half  a  century  has  ever  seriously  suggested 
making  war  upon  us.  We  have  had  in  the  past 
no  foreign  wars  save  of  our  own  choosing. 
There  was  never  a  time  when  our  people  were  so 
determinedly  set  on  peace.  Where  then  is  our 
antagonist? 

Not  Great  Britain,  that  is  certain.  We  are 
bone  of  her  bone  and  Canada,  between  us,  is 
drawn  by  the  closest  ties  to  both.  There  have 
been  in  the  past  English  statesmen,  scornful  of 
plebeian  America,  and  American  politicians  whose 
function  it  was  to  "twist  the  British  Lion's  tail." 
We  have  been  sometimes  swayed  or  apparently 
swayed  by  Irish  influences.  We  have  been  vexed 
by  "a  certain  condescension  from  foreigners"  and 
we  have  resented  the  bombast  of  British  Imperial- 


164  UNSEEN  EMPIRE 

ism,  too  much  like  our  own.  But  all  this  has  been 
skin-deep,  and  the  ties  that  bind  us  to  England 
may  not  be  severed.  With  or  without  a  treaty, 
we  shall  never  have  a  difference  with  her  that 
cannot  be  settled  by  arbitration. 

Is  it  France?  Assuredly  not.  Here  again  we 
have  a  multitude  of  ties  and  no  hint  of  estrange- 
ment. No  armament-lobbyist  or  other  disturber 
of  society  has  ventured  to  suggest  a  possible  clash 
between  the  two  great  republics. 

What  then  of  Germany?  Germany  and  the 
United  States  have  a  thousand  reasons  for  friend- 
ship and  not  one  for  enmity.  Nearly  one-fourth 
of  our  people  are  of  German  blood  and  Germany 
has  furnished  full  share  of  our  leading  men.  Our 
higher  education  owes  more  to  German  scholar- 
ship than  to  all  other  foreign  influences  whatso- 
ever. The  interweaving  of  business  and  com- 
merce between  Germany  and  the  United  States 
is  scarcely  less  complex  than  the  nexus  which 
joins  us  to  England.  The  great  commerce  rep- 
resented by  the  North  German  Lloyd  and  the 
Hamburg-American  Company  deals  chiefly  with 
the  United  States.  England's  quarrels  are  not 
ours.  Moreover,  we  do  not  believe  that  England 
has  any  real  quarrel  with  Germany.^ 

5  In  the  midst  of  futile  noise  and  nagging  diplomacy,  it  is 
most  refreshing  to  read  the  nohlc  and  sciiohirly  address 
delivered  by  Viscount  Haldane,  liritish  Secretary  of  State 
for  War,  at  the  University  of  Oxford  on  August  3,  1911, 
entitled  "Great  Britain  and  Germany,  a  study  in  National 
Characteristics."     Tiiis  is  a  most  truthful  and  sjinpathetic 


RETRENCHMENT  165 

But  the  Monroe  Doctrine,  some  may  say,  does 
not  this  gall  Germany  by  restricting  her  colonial 
operations  to  Africa  and  Asia?  If  so,  Germany 
has  given  no  indication  of  being  vexed.  Commer- 
cially she  controls  South  America  already,  if  we 
may  use  the  word  "control"  for  a  relation  which 
rests  on  mutual  benefit.  Her  merchants  have  seen 
their  opportunity  and  they  have  used  it.  The 
same  chance  is  open  to  any  nation.  The  German 
trade  would  gain  nothing  from  the  annexation 
of  any  South  American  state. 

But  South  Brazil  is  becoming  German.  Will 
not  these  provinces  revolt  and  throw  themselves 
under  the  protection  of  the  German  flag?  There 
are  no  visible  signs  of  any  such  intention,  no  likeli- 
hood of  the  dismemberment  of  Brazil,  no  desire 
to  become  part  of  German  Imperialism.  The 
"mailed  fist,"  and  the  "spiked  helmet,"  the  em- 
blems of  German  imperialism,  have  no  attraction 
to  the  German  trader.  He  prefers  to  carry  on 
his  business  under  a  less  exacting  Hag  than  that 
of  the  Fatherland.  I  have  yet  to  find  a  Ger- 
man who  attaches  the  slightest  importance  to  this 
matter.  It  is  certainly  too  remote  to  enter  into 
our  military  and  naval  calculations.  Even  if  it 
demanded  consideration,  the  boycott  is  a  weapon 
more  effective  than  the  sword.  But  we  may  note 
in  passing  that  sword  and  boycott  alike  are  two- 
edged,  cutting  both  ways  at  once. 

discussion  of  the  real  relations,  altogether  friendly,  of  the 
people  of  the  two  nations. 


166  UNSEEN  EMPIRE 

Is  our  enemy  among  the  smaller  nations  of 
Europe?  To  ask  the  question  is  to  answer  it. 
The  one  item  of  the  tourist  trade  goes  far  to 
pardon  any  lapses  on  our  part  in  international 
courtesy. 

Is  it  Russia?  We  deprecate  the  Russian  treat- 
ment of  Jews,  of  Persians,  of  Finns — and  for  that 
matter  of  Russians — but  no  one  dreams  of  fight- 
ing about  it.  At  long  range,  moral  suasion  is 
our  strongest  weapon. 

Have  we  an  enemy  in  South  America?  No 
military  expert  will  ever  admit  it,  but  every  com- 
mercial expert  recognizes  that  we  might  to  ad- 
vantage go  farther  in  the  promotion  of  friend- 
ships with  these  Latin  nations. 

Only  Japan  is  left  and  to  point  her  out  as  our 
rival  and  our  enemy  is  the  most  criminal  folly 
of  all.  The  Japanese  are  fond  of  sa^'ing:  "The 
Pacific  Ocean  unites  our  nations,  it  does  not 
separate."  The  leaders  of  Japan  are  largely  men 
educated  in  the  United  States,  and  thoroughly 
imbued  with  our  traditions  of  college  loyalty. 
Japan  recognizes  the  United  States  as  her  near- 
est neighbor  among  Western  nations,  her  best 
customer  and  her  most  steadfast  friend.  It  is 
said  of  Korea  that  through  the  ages  her  face 
was  toward  China,  her  back  toward  Japan. 
Through  the  ages,  the  face  of  Japan  has  been 
toward  Asia.  Her  present  ambitions  and  her 
financial  interests  lie  now  in  the  reclaiming  of 
Korea,   in   the   safeguarding   of  her   investments 


WAY  TO  RETRENCH  167 

in  South  Manchuria  and  in  the  part  she  must  yet 
play  in  the  future  of  China.  For  her  own  affairs 
she  needs  every  yen  that  she  can  raise  for  the 
next  half  centurj'.  She  would  not  if  she  could 
organize  an  expedition  against  us  and  she  could 
not  if  she  would. 

A  Way  to  Retrench 

We  believe  that  the  public  opinion  of  the  na- 
tion is  turning  away  from  war.  This  means 
sooner  or  later  an  abatement.  But  in  our  pres- 
ent machinery  of  government  there  is  no  point 
where  public  opinion  impinges  on  the  matter  of 
national  expense.  That  this  is  a  "billion-dollar 
nation,"  spending  that  incalculable  sum  each 
year  on  its  civil  and  military  affairs,  seems  a 
matter  rather  of  pride  than  shame,  even  though 
we  are  told  on  very  high  authority  that  one-third 
of  this  sum  is  absolutely  wasted. 

Following  the  model  of  our  Tariff  Board,  there 
should  be  in  the  United  States  a  High  Commis- 
sion composed  of  statesmen  and  economists  who 
should  decide,  as  civilian  citizens,  on  the  aim,  ex- 
tent and  purpose  of  national  defense.  This  done, 
a  committee  of  military  experts  should  determine 
ways  and  means  to  accomplish  these  necessary 
results.*^ 

c  Since  writing  the  above,  I  have  learned  that  the  Sec- 
retary of  War  has  suggested  a  somewhat  similar  plan. 
This  involves  the  creation  of  a  National  Council  of  De- 
fense, composed  of  two  members  of  the  Cabinet,  four 
Senators,  four  Representatives,  two  Army  and  two  Navy 
officers.     It  shall  be   the  duty  of  this  Commission  to  sag- 


168  UNSEEN  EMPIRE 

Besides  the  gigantic  cost  of  armament  there  is 
another  sort  of  waste  in  connection  with  national 
defense,  for  which  the  officials  of  army  and  navy 
are  not  in  the  remotest  degree  responsible.  This 
consists  in  extravagant  multiplication  of  navy 
yards  and  army  posts  at  the  demand  of  local 
pride  or  local  greed,  through  the  efforts  of  "log- 
rolling" Congressmen. 

General  W.  W.  Wotherspoon  ^  estimates  that 
the  elimination  of  those  useless  expenditures  which 
have  been  forced  on  Congress  by  local  demands 
would  effect  a  reduction  of  more  than  half  the 
present  cost  of  maintenance  of  the  army.  A 
proper  condensation  of  army  posts  would  reduce 
the  cost  of  these  establishments  from  $42,300,000 
to  .$21,132,000  and  the  annual  cost  of  upkeep 
from  $846,720  to  $211,680.  A  similar  reorgan- 
ization of  the  Navy  Yards,  as  urged  by  the  Sec- 
retary of  the  Navy,  would  effect  a  still  larger 
reduction. 

An  officer  of  the  army  once  said  to  the  writer : 
"It  is  no  part  of  the  work  of  military  experts  to 
determine  what  places  need  defense,  but  to  spend 

gest  "a  broad  and  comprehensive  military  and  naval  policy 
for  the  country."  In  the  composition  of  this  body,  it  is 
said  "there  lies  no  desire  that  military  opinion  should  pre- 
vail in  its  dcliljeration." 

The  appointment  of  such  a  Commission  would  be  a 
great  step  toward  making  our  military  expenditures  rational 
as  well  as  economical,  tliough  it  would  seem  to  me  that 
the  non-official  public  should  also  be  represented,  and  per- 
haps by  a  majority  in  the  commission. 

1  The   Independent,    February    15,    1912,   p.    343. 


READJUSTMENT  169 

to  the  best  advantage  whatever  sums  may  be  as- 
signed to  any  given  purpose.  If  we  are  directed 
to  fortify  Honolulu,  we  shall  plan  the  most  per- 
fect defense  possible  for  the  money  and  under  the 
conditions." 

Readjustment  of  Values 

It  is  necessary  that  we  should  undertake  a  re- 
adjustment of  our  estimate  of  relative  values  in 
our  functions  of  government.  Matters  of  the 
most  vital  moment  pass  unheeded,  while  sums 
which  would  meet  almost  every  need  which  gov- 
ernment can  satisfy  are  voted  for  items  of  mili- 
tarism, apparently  without  a  second  thought. 

For  example,  we  have  in  the  band  of  "white 
slavers"  *  an  international  group  of  the  worst 
kind  of  criminals  who  form  a  menace  to  every 
family  in  our  land.  The  sum  now  provided  yearly 
for  protection  against  them  would  keep  us  in 
smokeless  powder  for  a  day  and  a  half.  The 
whole  infamous  traffic  the  world  over  could  be 
exterminated  for  the  cost  of  a  third-rate  battle- 
ship.'' 

The  enemies  that  threaten  our  society  are  with- 
in, not  without.  The  artistic  completeness  of  the 
work    of    defending    our    shores    against    impos- 

8  The  term  "White  Slave"  was  originally  and  aptly  ap- 
plied to  military  conscripts,  according  to  Frederic  Passy. 
It  was  used  in  1867,  by  Emile  Girardin,  and  it  originated 
with  the  Emperor  Napoleon  III. 

0  At  the  present  writing,  this  sum  is  said  to  be  less 
than  $15,000.  However,  in  the  current  appropriation  bill 
of  191x?,  $^50,000  has  been  asked  for. 


170  UNSEEN  EMPIRE 

sible  enemies  should,  if  necessary,  wait  until  we  can 
make  some  better  start  on  our  moral  and  physical 
sanitation.  The  danger  from  foreign  foes  is  a 
mere  nightmare  reminiscence  of  mediaevalism. 
The  danger  from  the  "White  Slaver"  and  the  "Red 
Plague"  surrounds  us  on  every  side. 

In  this  connection  we  may  mention  the  need  of 
a  national  university.  Every  great  capital  in 
the  world,  London  and  Washington  alone  ex- 
cepted, maintains  as  a  matter  of  course,  a  corre- 
spondingly great  university.  Since  the  days  of 
Washington  who  gave  his  fortune  to  Congress  to 
this  end,  the  project  has  been  under  discussion. 
With  each  succeeding  Congress  it  has  been  set 
aside  because  the  millions  necessary  could  not  be 
spared  from  the  cost  of  national  defense. 

Such  a  center  of  advanced  work  is  in  itself  a 
national  defense.  It  would  utilize  for  our  en- 
lightenment the  great  riches  of  our  capital  in 
science,  art,  statistics  and  libraries.  It  would 
furnish  a  reservoir  of  experts  who  could  be  drawn 
upon  in  all  activities  of  government  in  which 
special  training  is  required:  it  would  call  from 
other  lands  advanced  students  of  the  workings 
of  democracy.  Lastly  it  would  furnish  to  the 
social  life  of  Washington  the  element  not  now  ade- 
quately developed,  of  men  of  character  and 
scholarship  permanently  at  home,  to  whom  the 
petty  incidents  of  politics  and  the  fate  of  appro- 
priation bills  are  not  the  objects  of  first  interest. 


READJUSTMENT  171 

In  the  recasting  of  values  the  need  of  a  national 
university  should  have  a  leading  place. 

It  should  be  the  place  of  the  university  at 
Washington  to  demonstrate  with  Professor 
Huxley  that  the  day  has  come  when  civilized  na- 
tions must  "discard  their  old  weapons  to  make 
way  for  the  new  ones  forced  upon  us  by  the 
growth  of  knowledge  and  the  rush  of  commerce." 
"We  are  in  the  presence,"  Professor  Lockyer  ^^ 
reminds  us,  "of  a  new  struggle  for  existence,  a 
struggle  which  once  commenced  must  go  on  till  the 
fittest  survive.  It  is  a  struggle  in  which  science 
and  brains  take  the  place  of  swords  and  sinews. 
The  school,  the  university,  the  laboratory  and  the 
workshop  are  the  battlefields  of  this  new  war- 
fare." 

The  real  strength  of  a  great  nation  does  not 
lie  in  its  belated  militarism,  developed  at  the  cost 
of  an  unceasing  burden  of  debt.  It  rests  on 
the  lives  and  character  of  its  men,  their  ability 
to  work  to  the  best  advantage  morally  and 
economically  and  their  power  to  assimilate  and  to 
utilize  the  garnered  and  classified  experience  of 
the  race. 

In  his  famous  address  on  the  "Moral  Grandeur 
of  Nations"  at  Boston  in  1845,  Charles  Sumner 
showed  that  the  battle-ship  Ohio,  then  at  anchor 
in  Boston  Harbor,  had  far  exceeded  in  cost  the 
greatest  of  our  educational  institutions.     The  en- 

10  Nature,  Sept.  1903. 


172  UNSEEN  EMPIRE 

dowmcnt  of  Harvard  College  at  that  time  was 
$703,175,  its  annual  budget  $47,935.  The  Ohio 
had  cost  $834,845;  its  annual  upkeep  was  $220,- 
000. 

Harvard  University,  still  our  greatest  seat  of 
learning,  has  grown  immeasurably  in  six  decades. 
Her  endowment  has  now  risen  to  $24,323,618, 
mostly  from  the  grateful  gifts  of  those  who  have 
been  her  students ;  her  annual  expenses  to  more 
than  two  million  and  a  quarter.  She  has  in  fact 
far  outrun  the  Ohio  of  1845,  though  I  believe 
that  a  new  Ohio  of  costlier  build  is  still  in  the  serv- 
ice. I  do  not  know  what  the  new  Ohio  cost,  but 
it  will  take  half  the  endowment  of  Harvard  Uni- 
versity in  a  few  years  to  replace  it,  while  the  en- 
tire endowment  of  Harvard  College  in  Sumner's 
time  would  not  pay  its  upkeep  for  a  single  year. 
And  before  long  it  must  go  unused  and  unre- 
membered  to  the  junkheap,  while  the  influence  of 
the  University  has  permeated  and  permanently 
ennobled  Christendom.  This  influence  in  all  its 
ramifications  in  America  to-day  has  a  value  be- 
yond all  question  or  comparison. 

The  need  of  battle-ships  may  be  great — as  to 
this  we  have  yet  to  be  convinced.  But  there  can 
be  no  question  as  to  the  need  of  universities. 

Chief  Business  of  Government 

The  chief  business  of  government  should  be  no 
longer  war  and  diplomacy.  It  should  be,  to  fall 
back     on   the  definition  of  Aristotle,  restated   in 


BUSINESS  OF  GOVERNMENT       173 

similar  terms  wholly  independently  by  Abraham 
Lincoln,  to  establish  justice  among  men  and  to 
do  those  things  of  common  necessity  which  col- 
lective action  can  accomplish  better  than  private 
enterprise. 

But  in  the  past  and  in  the  present,  it  is  cer- 
tainly true  that  the  most  costly  and  most  absorb- 
ing business  of  government  has  been  war  prepara- 
tion. Government  by  Congress  or  by  Parliament 
is  still  too  often  a  device  by  which  the  people  pay 
for  what  they  do  not  want,  and  at  times  for  what 
they  do  not  get.  "I  cannot  help  thinking  of  you 
as  ye  deserve,  O  ye  Governments,"  said  Thoreau. 
"The  only  government  that  I  recognize,  and  it 
matters  not  how  few  are  at  the  head  of  it  or 
how  small  its  army,  is  that  which  establishes  jus- 
tice in  the  land,  never  that  which  establishes  in- 
justice." 

The  chief  "national  defense"  which  any  nation 
needs  to-day,  is  protection  from  the  enemies  with- 
in itself.  Such'  protection  is  possible  only 
through  a  broad  statesmanship  which  sees  the 
end  from  the  beginning,  and  from  beginning  to 
end    will    strive    for    the    welfare    of    its    people. 

The  "grandeur  of  nations"  is  measured  not  by 
their  extent  on  the  map ;  not  by  their  population 
or  wealth  nor  their  apparent  military  or  naval 
supremacy;  nor  yet  in  the  long  run  by  their  uni- 
versities, their  arts  or  tlieir  sciences.  Emerson 
sa3's  "America  means  opportunity."  That  na- 
tion  is  great   which   to   its   rank   and  file  means 


174  UNSEEN  EMPIRE 

opportunity  and  which  further  breeds  men  capable 
of  seizing  the  opportunity'  it  offers.  First  then 
they  must  be  free  from  cinishing  burdens  of  debt. 
Next  they  must  live  in  peace.  War  implies 
everywhere  a  reversal  of  the  processes  of  natural 
selection.  Broadly  speaking,  in  war  the  strong- 
est are  destroyed,  the  men  best  fitted  to  be  the 
parents  of  the  new  generation. 


IX.     THE  PASSING  OF  WAR 
The  Future  of  War 

In  the  majestic  work  of  Jean  de  Bloch  ^  on 
war  and  its  future,  the  foundation  of  the  modem 
peace  movement,  it  is  shown  that  international 
war  has  become  a  physical  impossibility.  The 
term  war  in  that  sense,  as  Bloch  himself  observed,^ 
does  not  apply  to  "frontier  brawls  nor  to  punitive 
operations  or  trumpery  expeditions  against  semi- 
barbarous  people." 

"The  war  of  the  future,  the  war  which  has  be- 
come impossible,  is  the  war  which  has  haunted  the 
imagination  of  mankind  for  the  last  thirty  years, 
the  war  in  which  great  nations,  armed  to  the 
teeth  were  to  fling  themselves  with  all  their  re- 
sources into  a  struggle  for  life  and  death.  This 
is  the  war  that  every  day  becomes  more  and  more 
impossible  .  .  .  alike  from  a  military, 
economic,  and  political  point  of  view.  The  very 
development  that  has  taken  place  in  the  mechan- 
ism of  war  has  rendered  war  an  impracticable 
operation.  The  dimensions  of  modern  ar- 
maments and  the  organization  of  society  have 
rendered  its  prosecution  an  economic  impossibility, 
with  finally  the  inevitable  result  of  a  catastrophe 
which  would  destroy  all  existing  political  organi- 

1  In  Russian,  Ivan  Stanislavich  Blioch. 

2  In  an  interview  with  Mr.  William  T.  Stead. 

175 


176  UNSEEN  EMPIRE 

zations.  Thus,  the  great  war  cannot  be  made, 
and  any  attempt  to  make  it  would  result  in  sui- 
cide." 

Bloch  concludes  his  discussion  with  the  demon- 
stration that : 

"If  the  present  conditions  continue,  there  can 
be  but  two  alternatives,  either  ruin  from  the  con- 
tinuance of  the  armed  peace,  or  a  veritable 
catastrophe  from  war. 

"The  question  is  naturally  asked:  What  will 
be  given  to  the  people  after  war  as  compensation 
for  their  immense  losses.?  The  conquered  cer- 
tainly will  be  too  exhausted  to  pay  any  money 
indemnity,  and  compensation  must  be  taken  by 
the  retention  of  frontier  territories  which  will  be 
so  impoverished  by  war  that  their  acquisition  will 
be  a  loss  rather  than  a  gain. 

"With  such  conditions  can  we  hope  for  good 
sense  among  millions  of  men  when  but  a  handful 
of  their  former  officers  remain?  Will  the  armies 
of  Western  Europe,  where  the  Socialist  prop- 
aganda has  already  spread  among  the  masses, 
allow  themselves  to  be  disarmed,  and  if  not,  must 
we  not  expect  even  greater  disasters  than  those 
which  marked  the  short-lived  triumph  of  the  Paris 
Commune.''  The  longer  the  present  position  of 
affairs  continues  the  greater  is  the  probability 
of  such  convulsions  after  the  close  of  a  great 
war.  It  cannot  be  denied  that  conscription,  by 
taking  from  productive  occupations  a  greater 
number    of    men    than    the    former    conditions    of 


A  WAY  OUT  177 


service,  has  increased  the  popularity  of  subver- 
sive principles  among  the  masses.  Formerly  only 
Socialists  were  known ;  now  Anarchism  has  arisen. 
Not  long  ago  the  advocates  of  revolution  were  a 
handful;  now  they  have  their  representatives  in 
all  parliaments,  and  every  new  election  increases 
their  number  in  Germany,  in  France,  in  Austria 
and  in  Italy.  It  is  a  strange  coincidence  that 
only  in  England  and  in  the  United  States,  where 
conscription  is  unknown,  are  representative  as- 
semblies free  from  these  elements  of  disintegra- 
tion. Thus  side  by  side  with  the  growth  of  mili- 
tary burdens  rise  waves  of  popular  discontent, 
threatening  a  social  revolution. 

"Such  are  the  consequences  of  the  so-called 
armed  peace  of  Europe — slow  destruction  result- 
ing from  expenditure  on  preparations  for  war, 
or  swift  destruction  in  the  event  of  war — in  both 
events,  convulsions  in  the  social  order." 

A  Way  Out 

The  way  out  of  war  will  open,  the  world  over, 
with  the  enlightenment  of  public  opinion,  with 
the  extension  of  international  law  and  the  per- 
fection of  the  International  Courts  at  The  Hague. 
This  machinery  of  Conciliation  is  created  by 
public  opinion,  and  with  its  more  perfect  adjust- 
ment, the  force  of  public  opinion  behind  it  will 
grow  steadily  more  insistent.  Little  by  little  in 
the  thought  of  men  war  is  erased  from  the  list 
of  possibilities.      Its  crude  and  costly  conclusions 


1T8  UNSEEN  EMPIRE 

become  less  and  less  acceptable,  and  the  victories 
of  peace  more  and  more  welcome,  and  more  and 
more  stable. 

The  fact  that  a  better  way  of  composing 
differences  exists  is,  in  itself,  a  guarantee  that  no 
serious  differences  shall  occur.  For,  as  a  rule, 
wars  do  not  arise  from  the  alleged  "causes  of 
war."  These  "causes"  are  almost  wholly  mere 
pretexts  after  war  has  been  determined  on. 
"Affairs  of  honor"  between  nations  are  worthy 
of  no  more  respect  than  "affairs  of  honor"  among 
men.  In  either  case,  an  adequate  remedy  is 
found  in  a  few  days  or  months  of  patience,  and 
in  the  adjustments  of  disinterested  friends.  This 
we  call  arbitration,  and  its  supreme  virtue  with 
nations  as  with  individuals,  lies  in  its  being  un- 
limited. 

In  our  own  country,  at  present,  there  opens  a 
door  of  escape  from  the  waste  of  war  preparation. 
This,  as  we  have  already  suggested,^  lies  in  the 
appointment  of  a  civil  commission  which  shall 
give  a  definite  purpose  to  our  plans  of  national 
defense.  No  one  can  justify  gigantic  expendi- 
tures, blindly  undertaken.  It  is  surely  not  neces- 
sary for  us  to  strive  for  ideal  perfection  of  de- 
fense against  unknown  and  imaginary  foes.  It 
is  surely  unnecessary  to  pour  out  $800,000 
a  day  (not  counting  pensions  nor  interest) 
simply  because  two  other  nations  are  doing  the 
same,  and  still  three  others  would  keep  step  if 
3  See  page  167. 


PASSING  OF  WAR  179 

they  could.  Nor  should  we  act  from  year  to 
year  on  the  advice  of  interested  parties  solely, 
"muddling  along"  through  sheer  inertia  without 
a  look  forward  to  our  final  aim. 

Such  an  aim  a  commission  of  statesmen  could 
furnish.  With  its  help  we  should  justify  our 
ways  or  else  change  them.  No  one  can  doubt 
that  to  justify  we  must  needs  also  change,  in 
what  way  or  in  what  degree  perhaps  no  one  can 
now  foretell.  But  this  at  least  is  certain :  if  the 
United  States  should  find  for  herself  a  definite 
policy,  building  no  more  fortresses,  dreadnaughts, 
or  destroyers  until  her  best  minds  are  convinced 
that  these  are  needed,  such  action  would  go  far, 
very  far,  toward  solving  the  problems  of  debt- 
ridden  Europe. 

The  Passing  of  War 

The  passing  of  war  is  marked  by  many  condi- 
tions both  incongruous  and  disconcerting,  as  I 
have  already  tried  to  set  forth.  From  the  stand- 
point of  Social  Evolution,  these  erratic  and 
fantastic  phenomena  are  all  necessary  stages  in 
a  world  process — the  change  from  the  rule 
of  force  to  that  of  law.  On  the  one  hand  we 
note  the  persistence  of  media3val  traditions 
and  their  consequences,  the  burden  of  debt, 
the  unwieldy  and  ruinous  body  of  armament, 
the  "war  scare,"  the  overlordshlp  of  the  "pawn- 
broker," the  sinuous  trail  of  secret  diplomacy,  the 


180  UNSEEN  EMPIRE 


"Great  Illusion"  and  the  "Mirage  of  the  Map." 

On  the  other  hand,  and  parallel  with  these,  we 
remark  the  fraternity  of  trade,  the  unification 
of  banking,  the  internationalism  of  art,  science 
and  invention,  the  steady  extension  of  humane 
sentiments  and  the  crystallization  of  world  con- 
gresses and  world  courts.  It  has  been  observed 
that  the  different  nations  of  Europe  have  yielded 
up  their  sovereignty  and  that  they  are  now  but 
"Provinces  of  the  Unseen  Empire."  This  phrase 
referred  to  the  subservience  of  debt,  but  it  is 
true  in  another  and  more  honorable  sense.  They 
are  in  fact  but  provinces  in  the  unseen  em- 
pire of  civilization.  The  world  has  become  an 
intellectual  unit.  The  thoughts  of  all  men  are 
the  common  property  of  all.  In  like  fashion  the 
world  has  become  an  economic  unit.  The  cur- 
rents of  business  flow  through  all  nations  alike. 
Whatever  disturbs  one  part  of  the  organism 
affects  all  others.  The  boundaries  of  nations 
really  signify  no  more  than  the  boundaries  of 
counties  or  states.  Only  our  outworn  diplomacy 
and  the  enmities  it  engenders  serve  to  conceal  this 
fact. 

It  is  easy  to  see  that  these  are  days  of  transi- 
tion. The  past  is  losing  its  hold.  The  future 
has  yet  to  make  its  grasp  complete.  And  from 
the  larger  point  of  view  we  see  that  these  various 
conditions  could  not  have  come  together  at  any 
earlier  stage  in  the  history  of  the  world.     A  hun- 


PASSING  OF  WAR  181 

dred  years  ago,  these  combinations  would  have 
been  unthinkable. 

A  hundred  years  hence,  the  combinations  of 
to-day  will  be  equally  incredible.  The  motives 
behind  our  present  war  preparation  will  then  seem 
as  remote  as  to  us  now  are  the  motives  behind  the 
great  Crusades. 

Mankind  does  not  linger  over  impossibilities. 
The  coat-of-mail  vanished  from  European  his- 
tory all  at  once,  when  men  realized  that  it  had 
no  further  effectiveness.  The  war  equipment  of 
to-day  will  disappear  scarcely  less  promptly  when 
men  see  clearly  the  changes  which  have  made  it 
futile  and  absurd.  In  the  fine  and  true  words  of 
Admiral  Winslow:  "No  matter  is  so  trivial  that 
nations  will  not  go  to  war  over  it,  if  they  want  to 
go  to  war.  No  difference  is  so  weighty  that  it 
cannot  be  quietly  settled  if  nations  do  not  wish 
war." 

Science  has  slain  War.  Rather  it  has  forged 
the  weapons  by  which  War  has  slain  itself.  It 
remains  for  Finance  to  give  it  a  decent  burial. 


APPENDIX 


TABLES   OF   DEBT   AND   EXPENDITURE 

Following  are  tables  ^  illustrating  the  cost  of 
armament  and  other  matters  of  expense  of  the 
leading  nations  of  the  world.  Of  these,  tables  A 
to  M  are  the  work  of  Mr.  Arthur  W.  Allen,  cer- 
tain additions  to  table  A  having  been  made  by  Mr. 
Clayton  D.  Carus. 

1  These  tables  have  been  separately  printed  by  the  World 
Peace  Foundation  under  the  title  of  "The  Drain  of  Arma- 
ment." 


185 


186 


UNSEEN  EMPIRE 


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DEBT  AND  EXPENDITURE 


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TABLE  D. 

COST    OF    ARMY    PER    UNIT    OF    FIGHTING   FOECE    FOE 
THE   TEN   CHIEF   MILITAEY   NATIONS. 

Fighting                Cost  of  Cost  per 

Country                            Force                    Army  man 

Austria-Hungary     396,000        $      73,513,000  $  186 

France     582,000              187,632,000  322 

Germany     626,000             203,938,000  326 

Great    Britain 1 262,000           1138,800,000  i530 

Italy    291,000                81,033,000  279 

Japan    2225,000                49,196,000  2  219 

Russia   1,250,000             265,642,000  212 

Spain     115,000               37,671,000  328 

Turkey    2375,000             242,071,000  2112 

United    States    85,000              162,357,000  1910 

Totals    4,207,000        $1,241,853,000  $~295 

'  Regular  army  only;  deducting  about  $19,600,000  appro- 
priated for  Reserves  and  Territorials,  the  average,  per  man 
of  the  regular  force  is  about  $455. 

*  Uncertain. 


TABLE  E. 

COST  OF  ARMY  AND  NAVY  PER  UNIT  OF  POPULATION, 

FOR    THE    TEN    CHIEF    MILITARY    NATIONS. 


Country  1  Population 

Austria-Hungary    51,000,000 

France     39,000,000 

Germany    65,000,000 

Great   Britain    45,000,000 

Italy    35,000,000 

Japan     52,000,000 

Russia    160,000,000 

Spain    20,000,000 

Turkey    22,000,000 

United   States    92,000,000 

Total     581,000,000 

'World   Almanac,    1912. 


Cost  per 

unit  of 

popu- 

Army &  Navy 

lation. 

9     87,000,000 

$1.70 

271,000,000 

7.00 

318,000,000 

4.90 

342,000,000 

7.60 

121.000,000 

3.45 

93,000,000 

1.79 

320,000,000 

2.00 

51,000,000 

2.55 

48,000,000 

2.18 

283,000,000 

3.07 

$1,934,000,000 

$3.33 

192  UNSEEN  EMPIRE 


TABLE  F. 

PROPORTION  OF  MILITARY  CHARGES  TO  TOTAL  GROSS 

EXPENDITURES  ^  IN  TEN  LEADING  NATIONS. 

Country  Total  Expenditures  Army  &  Navy  % 

Austria-Hungary  2     ...  $890,656,000      $      87",i?44,000  09.8 

France     877,-'9^.000  270,918,000  30.9 

Germanv     731,-'86,000  318,446,000  43.5 

Great  Britain   997,410,000  341,8^0.000  34.3 

Italy     500,595,000  120,676,000  24.1 

Japan    284,452,000  92,601,000  32.5 

Russia    1,360,054,000  319,770,000  23.5 

Spain   224,526,000  51,367,000  22.9 

Turkey     154,033,000  48,294,000  31.4 

United  States   654,138,000  283,086,000  43.3 

Totals    $6,674,442,000"      $1,934,222.0(JD  29.0 


TABLE    G. 

GROWTH    OF    EXPENDITURES    FOR    ARMY,    1881-1911, 

FOR  SEVEN  NATIONS.^ 

The  estimated  total  for  thirty  years  is  obtained  in  all 
cases: 

1.  By  averaging  the  amounts  at  the  beginning  and  end 
of  each  decade; 

2.  By  averaging  the  three  amounts  thus  obtained; 

3.  By  multiplying  the  final  average  by  thirty. 
Country  1881  1891  1901 

Austria-Hungary2  .$  61,827,000  $  58.645,000  $      59,726.000 

France     113,597,000  141,694,000  138,723,000 

Germanv     91,075,000  120,964,000  167,588,000 

Great    Britain     ...     75,126,000  88,640,000  2  307,500,000 

Italy     40,585,0C3  56,484,000  54,232,000 

Russia     90,783,000  123,326,000  162,012,000 

United  States   38,117,000  44,583,000  134,775,000 

Totals    $511,110,000  $634,336,000  $1,024,5.56,000 

*  Interest  on  national  debt,  pension  charges  and  other  war 
matters  not  belonging  to  the  immediate  cost  of  militarism, 
are  not  included  under  "Army  and  Navy  Expenditures."  For 
ex.-imple.  In  the  United  States  the  sum  of  $161,710,367  was 
ipaid  out  for  pensions  In  1909.  and  about  $21,000,000  as  In- 
terest on  war  debt.  The  total  war  expenditures  for  1909 
were  thus  about  $462,000,000,  or  about  69i  per  cent,  of  the 
total  expenditure.  The  total  expenditure  in  some  nations 
Includes  items  charged  in  others  to  local  expenses.  (D.  S.  J.) 

'  This  is  probably  larger  than  it  should  be.  It  is  difficult 
to  separate  the  Imperial  expenses  from  those  chargeable 
to  the  two  separate  nations.     (A.   W.   A.) 


DEBT  AND  EXPENDITURE         193 


Excess  over  Estimated  total 

1911  1881  for  30  years 
A  u  s  t  r  i  a-Hun- 

gary    $      73,513,000  $  11,686,000  $  1,860,410,000 

France    187,63:2,000  74,035,000  4,310,315,000 

Germany    203,938,000  112,863,000  4,360,585,000 

Great  Britain  . .      138,800,000  63,674,000  3,031,030,000 

Italy    81,033,000  40,448,000  1,715,250,000 

Russia    265,642,000  174,859,000  4,635,505,000 

United    States..      162,357,000  124,240,000  2,295,950,000 

Totals    $1,112,915,000  $601,805,000  $22,209,045,000 


TABLE  H. 

GROWTH    OF    EXPENDITURES    FOR    NAVY,    1881-1911, 

FOR   SEVEN   NATIONS. 

Country                        1881                     1891  1901 

Austria-Hungary    ,  .$     4,355,000    $     5,672,000  $     8,698,000 

France    42,557,000        43,754,000  65,857,000 

Germany    11,434,000         23,470,000  38,195,000 

Great  Britain   51,130,000         68.935,000  137,615,000 

Italy    8,870,000        24,293,000  24,477,000 

Russia    13,098,000        21,880,000  46,799,000 

United   States    13,537,000        22,006,000  55,953,000 

Totals   $144,981,000    $210,010,000  $377,594,000 


Excess  over  Estimated  total 

1911  1881  for30vears 

Austria-Hungary.. $  13,731,000  $  9P,376,000  $    234,130,000 

France     83,286,000  40,729,000  1,725,325,000 

Germany     114,508,000  103,074,000  1,246,360,000 

Great  Britain   203,020,000  151,890,000  3,336.250,000 

Italy     39,64,3,000  30,773,000  730.265,000 

Russia    54,128,000  41,030,000  1,022,920.000 

United  States   120,729,000  107,192,000  1,450,920,000 

Totals    $629,045,000    ^84,064,000     $9,746,170,000 

'  These  are  the  only  nations  that  present  a  fair  basis  of 
comparison  since  1S81. 

»Recltoned  as  $107,500,000  in  estimating  total  for  30  years, 
to  allow  for  extraordinary  expenditures  In  Boer  War. 


194  UNSEEN  EMPIRE 


TABLE  I. 

GROWTH     OF     COMBINED     EXPENDITURES     FOR     ARMY 
AND   NAVY,    1881-1911,   FOR   SEVEN    NATIONS. 

Country  1881  1891  1901 

Austria-Hungary.  .$  66,18-3,000  $64,317,000    $     68.4i34,000 

France     156,154,000  185,448,000  204,580,000 

Germany     102,509,000  144,434,000  205.783,000 

Great  Britain   126,256,000  157,575,000  445,115,000 

Italy     49,455,000  80,777,000  78,709,000 

Russia    103,881,000  145,206,000  208,811,000 

United  States   51,654,000  66,589,000  190,728,000 

Totals    $656,091,000    $844,346,000     $1,402,150,000 

Excess  over  Estimated  total 
1911  1881  for  30  years 
Austria-H  an- 
gary     $      87,244,000  $      21,062,000  $2,094,540,000 

France     270,918,000  114,764,000  6,035,640,000 

Germany     318,446,000  215,937,000  5,606,945,000 

Great   Britain.      341,820,000  215,564,000  6.367,280,000 

Italy     120,676,000  71,221,000  2,445,515,000 

Russia     319,770,000  215,889,000  5.658,425,000 

United  States.      283,086,000  231,432,000  3,996,870,000 

Totals    ...$1,741,960,000    $1,085,869,000    $32,205,215,000 
TABLE  J. 

^THE    GROWTH    OF    DEBT,    1881-1911,    OF    THE    FIVE 
GREAT  MILITARY  NATIONS  OF  EUROPE. 

Country  1891  1891  1901 

2  Austria-Hun- 

gary  $1,607,800,000  $2,914,876,000  $3,219,830,000 

France     3,972,407,000  6,400,000,000  6,011,079,000 

3  Germany    . .        43,804,000  308,377,000  555,738,000 

Italy     1,746,921,000  2,248,200,000  2,451,000.000 

Russia    1,225,000,000  1,797,365,000  3,112,000,000 

Totals    ..$8,595,932,000    $13,668,818,000    $15,349,647,000 

1  Interest  bearing  debt  only.  Issues  of  paper  money  are 
not  included. 

*  Austrian  Empire,  Austria  proper  and  Hungary  proper 
combined.  Since  1867  no  loans  have  been  contracted  by  the 
Elmpire. 

"  German  Empire  only.  Prussia  alone  has  a  separate  debt 
of    nearly    $2,400,000,000. 


DEBT  AND  EXPENDITURE         195 


Excess  over 

1911  1881 

2  Austria-Hungary    $3,612,389,000  $2,004,589,000 

France    6,286,435,000  2,314,028,000 

3  Germany    1,224,158,000  1,180,354,000 

Italy    2,614,183,000  867,262,000 

Russia    4,507,071,000  3,282,071,000 

TABLE  K. 

GROWTH  OF  INTEREST   CHARGE,   1881-1911,  OF  THE 

FIVE   GREAT   MILITARY   NATIONS   OF   EUROPE. 

Country                       1881  1891  1901 

Austria-Hungary    .  .$  65,108,000  $116,595,000  $128,793,000 

France    149,681,000  256,000,000  249,073,000 

Germany    1,752,000  12,335,000  18,525,000 

Italy    69,900,000  89,818,000  96,000,000 

Russia  55,125,000  90,881,000  140,065,000 

Totals    $341,566,000    $555,629,000    $632,456,000 

Excess  over  Estimated  total 
1911  1881  for  30  years 

A  u  s  t  r  i  a-Hun- 

gary     i  $144,496,000    $  79,388,000    $  3,501,900,000 

France    192,762,000         43.081,000         6,762,945,000 

<}€rmany    41,981,000        40,229,000  527,265,000 

Italy    92,145,000        22,245,000        2,668,405,000 

Russia    1180,283,000       125,158,000        3,386,500,000 

Totals     $651,667,000    $310,101,000    $16,847,015,000 

^  Estimated  at  4%. 

1  TABLE  L. 

THE     FIVE    GREAT    MILITARY    NATIONS    OF    EUROPE ; 

COMBINED    COST    OF    ARMIES    AND    NAVIES    WITH 

INCREASE    OF    INTEREST    CHARGES    DURING 

THIRTY    YEARS. 

Increase  of  interest 
Arntues  and    charges  due  to  in- 
Country  Navies  creased  debt.  Total. 
Austria-Hungary  2,094,540,000  $1,548,660,000  $  3,643,200,000 
France  6,035,640,000     2,272,515,000      8,308,155,000 


Germany 

Italy     

Russia   . . . 
Totals 


5,606,945,000        474,705,000       6,081.650,000 

2,445,515,000        571,405,000      3,016,920,000 

5,658,425.000     1,732,750,000       7,391,175,000 

.21,841.065,000  $6,600,035,000  $28,441,100,000 


»  See  Tables  VI  to  X  inclusive. 


196 


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TABLE  N. 
(From  the  Boston  Advertiser) 

EXPENDITJJKES     OF      THE     PUBLIC  MONEY     IN      THE 
UNITED   STATES. 

Military  Civil 

1899     $:301,514,672  $17,371,779 

1900     110,175,389  20,767,628 

1901     120,070,834  21,009,985 

1902     93,974,727  16,097,725 

1903    91,591,533  25,890,167 

1904     89,010,039  24,752,916 

1905     94,119,947  25,317,532 

1906     85,962,396  26,693,955 

1907     93,525,946  26,040,132 

1908     100,431,384  31,293,690 

1909     118,204,788  35,691,467 

1910     118,953,603  29,740,612 

1911     116,741,705  34,558,960 

In  round  numbers  since  the  Spanish  War  the  War  De- 
partment has  spent  more  than  $1,500,000,000,  while  the 
operation  of  the  civil  government  has  cost  only  about  $350,- 
000,000. 


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INDEX 


INDEX 


Abdul-Hamid,   138. 

Abdur  Rahman,  on  Russia, 
67. 

Absence  of  Check  on  Ex- 
penditure, 15:3. 

Abyssinia  and  Italy,  73. 

Acapulco,  Fisiiery  Conces- 
sions, 119. 

Admiral  of  the  Atlantic,  91. 

Advertiser,  Boston,  197. 

Advocate  of  Peace,  86. 

Affairs  of  honor,  178. 

Air  full  of  War,  113. 

Alexander  VI,  92. 

Alien  Soldiers  breed  chronic 
disorder,  67. 

Allen,  Arthur  W.,  185;  on 
national  debt,  44. 

America  means  opportu- 
nity, 173. 

American,   Boston,   117. 

American  Commerce,  161. 

Amschel,  Mayer,  called 
Rothschild,  9. 

Anarchism,  61. 

.Andrews,   Elizalieth,  156. 

Angtll,  Xorman,  37,  82,  83, 
84,  133,  134,  145;  on  peo- 
ple's interests,  61. 

Antipatriotism,  61. 

Appendix,  183. 

Argentina,  Xavy  of,  196. 

Aristotle,  IT2. 

Armageddon,  Cost  of,  74, 
75,   76,   77. 


Armament,  burden  of,  53; 
Competition,  86;  Syndi- 
cates, 111. 

Armor  Plate  Pres.s,  102. 

Arms  and  the  Man,  109. 

Armstrong,  Whitworth  & 
Co.,  103,  104. 

Army  of  Japan,  123. 

Atlantic  Monthly,  133. 

Attila   and    Bismarck,    145. 

Australia,  debt  of,  47. 

Australian  War  Scares,  111, 
123. 

B 

Bagdad   Railway,   138,   139. 

Banca  di  Italia,  73. 

Bank  of  England,  its  psy- 
chological reserve,  69. 

Banking,  and  International 
Relations,  145;  and  Pawn- 
broking,  14,  85;  and  War, 
83;  as  sensory  nerves  of 
Society,  84. 

Baring,  House  of,  14. 

Bastiat  on  War  as  an  ogre, 
54. 

Battleship  Ohio,  172. 

Beardmore  &  Co.,  103. 

Beaten  Men  of  beaten 
races,  98. 

Belated    Militarism,   90. 

Bella,  Bella,  Horrida  Bella, 
156. 

Bernhardi,  General  von,  90. 

Bernstein,  Ed,  154. 

Birkbeck   Bank,  .30. 

Bischoffheira,  House   of,  15. 


203 


204 


INDEX 


Bismarck,  li5;  and  Napo- 
leon, 111,  15;  on  French 
Indemnity,   37. 

Blaclvnian,  John  E,  120. 

Bleeding  France  white,  82. 

Bleichroder,  13,  16,  30. 

Blioch,  Ivan  S.,  175. 

Bloch,   Jean   de,   175. 

Block,  Maurice,  39. 

Boer  War,  effect  of,  30. 

Borrowing,   methods   of,   51. 

Bread  wanted,  not  Morocco, 
61. 

Brentano,  Lujo,  94. 

British  Admiralty,  views  of, 
94. 

British  debt,  27,  28,  29,  30. 

British   Imperialism,  107. 

British  Ship  Lobbv,  102. 

Brown  &  Co.,  103,"  104. 

Browne,  Edward  G.,  on  the 
Persian    Revolution,   64. 

Bulletin,  Sydney,  123. 

Burke,  Edmund,  102. 

Bushnell,  Katherine,  156. 

Business  of  Government, 
172. 

Butler,  Nicholas  Murray, 
113. 


Cadaverous     odor    of    lucre, 

102. 
Calvo  Doctrine,  97. 
Cammell,  Laird   &  Co.,  103. 
Camondo,  House  of,  16. 
Campbell,   Reginald  J.,   100. 
Canada,  Debt  of,  47. 
Canadian    Boundary,    140. 
Captain  Sleeps,  The,  156. 
Caribbean  Sea,  Danger  Zone 

of.   111. 
Carnegie,  Andrew,  74. 


Cartoons  of  the  farmer's 
burden,  8. 

Cams,  Clayton  D.,  185. 

Cassel,  20;   House  of,  18. 

Cassius,  113. 

Causes  of  War  not  vital, 
181. 

Cement  of  hypocrisy  lack- 
ing in  Russia,  69,  not 
lacking    in    England,    69. 

Chartered  Company  of 
Lower  California,   120. 

Chauvinism,  125. 

Chesterton,  Gilbert  K.,  on 
"Cement  of  Hypocrisy," 
69. 

China  and  the  squeeze,  154. 

Chronicle,  Japan,  121. 

Chronicle,  San  Francisco, 
115,    116. 

Chuo-Koron  on  Japanese 
Taxes,  94. 

Churchill,   Winston,    104. 

Civil  functions,  exaltation 
of,  152. 

Civil  War,  130. 

Colonies,  133. 

Commerce  of  America,  161. 

Concessions,    Mexican,    119. 

Conciliation,   177. 

Confederate  States,  debt  of, 
43. 

Consols,  value  of,  32. 

Consortium,  Das,  15. 

Conspiracy  against  Japan, 
114. 

Continuity  of  British  For- 
eign   Policy,   68. 

Control   of  Nations,  62. 

Control  of  the  Sea,  92. 

Corbet,  F.  J.,  156. 

Coronation  of  King  George 
V,  91. 


INDEX 


205 


Cost  of   Harvard,   173. 

Cost  of  Living,  59;  aifected 
by  militarism,  60,  rise  of, 
due  to  excessive  taxation, 
59;   rises   everywhere,  59. 

Cost  of  national  defense,  55. 

Cost  of  small  war,  73. 

Cost  of  war  steadily  rising, 
48. 

Credit  of  Europe,   15,  69. 

Credit  of  Nations,  27. 

Crimean  War,  effect  of,  30. 

Cromwell  on  source  of  au- 
thority,   6. 

Cuba,  156. 

D 

Daily  Mail,  London,  134. 

Dalnj  Vostok,  121. 

Danger  Zone  of  Caribbean 
Sea,  111. 

Debt  and  Expenditures  of 
world,  188-199. 

Debts  of  Nations,  186,  187. 

Defense   not   Defiance,   10-?. 

Deferred  Pajinent,  51. 

Degeneration  of  Nations, 
98;  due  to  war,  emigra- 
tion or  immigration,  98. 

Delaisi,  Francis,  on  "Mo- 
rocco Aifair,"  70. 

Delbriick,  Professor,  136. 

Deluded  fanatics  of  Peace, 
113. 

Deutschland  und  der  nachste 
Krieg,  90. 

Dewev,  Davis  R.,  on  War 
debt  of  United  States,  43. 

Diplomacy,  126,  136. 

Disarmament,  difficulties  in, 
li?7. 

Dockyard    Strategists,    116. 

Dollar  Diiilomacy,  62. 

Drago  Doctrine,  97. 


Dukes  of  England,  99. 
Dumas,     S.,    on     deaths    in 

time  of  war,  54. 
DuPont    Powder    Company, 

110. 
Dutch  finance,  28. 

E 

Economic  difficulties,   128. 

Eickhoflf,   144. 

Elections  in  Germany,  146. 

Emerson,  Ralph  Waldo, 
173. 

Empires,  fall  of,  126. 

Endless  Caravan  of  ciphers, 
denoting  War  expendi- 
tures,  54. 

England  and  Germany  as 
rival  powers,  143. 

England's  poverty,   100. 

England's   wealth,  100. 

Ententes,  and  enmities,  69. 

Evans,  Admiral  Robley  D., 
160. 

Evening  Post,  N.  Y.,  102, 
109. 

Exaltation  of  Civil  Func- 
tions, 152. 

Examiner,  Los  Angeles,  116. 

Examiner,  San  Francisco, 
116. 

Exchange  of  Journalists, 
123. 

Expenditures  of  Ten  Na- 
tions,  190. 

Expenditures  of  World,  188- 
197. 

Expenses   unchecked,    152. 

F 

Fabrique   d'Armes  Autrichi- 

ennes,   108. 
Farmer  and  his  Burden,  8. 
Fishery    Concessions     about 

Acapulco,    119. 


206 


INDEX 


Forces  working  for  Expen- 
diture, loa. 

Foreign  Offices,  127. 

Forest,  Baron  de,  18. 

Foster,  David  J.,  114. 

Fould,  House  of,  15,  20. 

France  and  Germany,  82. 

France,  Burden  of  Debt  of, 
23;  Debt  of,  199;  growth 
of  debt  of,  32,  33,  34,  35, 
36. 

Franklin  on  bad  wars,  84. 

French  Colonies,  135. 

French  Revolution,  33. 

Friendship,  with  France, 
164;  with  Germany,  164; 
with  Great  Britain  and 
Canada,  163;  with  Russia, 
166;  with  South  America, 
166. 

Future  of  War,  175. 


Gadke,  Colonel,  125. 
Gallatin,  Albert,  opposed  to 

debt,  42,  45. 
Gambetta     on    the     Empty 

Stocking,   101. 
Gare  au  Has  Vide,  101. 
German  African  ideals,  136. 
German  Colonies,  134. 
German  Imperialism,    165. 
Germans  in   Brazil,  165. 
Germany    and     England    as 

rival  powers,  143. 
Germany  and    France,  82. 
Germany  as  an  unhampered 

Jurisdiction,   142. 
Germany  as  cramjied  on  all 

sides,    141. 
Germany,    Burden    of     debt 

of,  24;   financial   crisis   of, 

40;  growth  of  debt  of,  37. 


Germany's  alleged  intrigues, 

116. 
Ghosts,   international,   123. 
Ginn,  Edwin,  dedication. 
Girardin  Emile,  169. 
God's  Test  of  Nations,  74. 
Golay,  Henri,  123. 
Gold  and  Silver  certificates, 

45. 
Goldschmid,  20,  House  of,  16. 
Government    by    the    people 

paying  for  war,  4. 
Government  ownership,  27. 
Governments,        173;        and 

Waste,   173. 
Grandeur  of  Nations,  173. 
Gratitude  of   Nations,  21. 
Great     Britain,     Burden    of 

debt  of,  23;  Debt  of,  198. 
Great  Illusion,  132. 
Great  Powers,  141. 
Grey,   Sir   Edward,   123;  on. 

prison  doors  of  debt,  3, 
Grotesque  of   History,  148. 
Guerard,  Albert  L.,  Preface; 

on  French  Banking,  58. 
Giinzburg,  House  of,  16,  17. 

H 
Hablu'l-Matin,  64. 
Hague  Conference,  93. 
Hague   Courts   and    Confer- 
ences, 177. 
Haldane,  Viscount,  164. 
Hands   across   the   Sea,   106. 
Harvard     College     and     the 

Ohio,   171,   172. 
Hawaii,  111. 
Hearn,    Lafcadio,    on    taxes 

of  Japan,  94. 
Heck,  George,  115. 
Hessian  Trooi)s,  10. 
Hidden  Trail  of  Diplomacy, 

136. 


INDEX 


207 


High  Commission  of  De- 
fense, 167. 

High  Finance  for  peace,  80. 

High  Finance,  Interests  of, 
80. 

Hirsch,  20;  House  of,  17,  18. 

Hirst,  Francis  W.,  10;2;  On 
Confusion  of  Debt  with 
currency,  4:2;  on  Credit  of 
Nations,  27;  on  National 
Debt,   27. 

Hobhouse,  Leonard  T.,  133. 

Hubbard,  Elbert,  on  Roths- 
child,   11. 

Hull,  William  I.,  on  the 
World's  vicious  circles,  86; 
on  Sea  Power,  86. 

Huxley,    Thomas    J.,    171. 

Hyena  idea  of  Nations,  90. 
I 

Illinois    as    a    power,    141. 

Imperial   Democracy,   156. 

Imperial  War,  131,  132. 

ImperialWar Treasure,  77;  at 
Spandau,  37. 

Imperialism,  107. 

Independent,  X.  Y.,  106. 

Indirect  Tax,  51. 

Indiscreet  Letters  from  Pe- 
king,  113. 

International  Code  Signal 
of  Pirates,  102. 

International   Courts,   177. 

International  Finance,  5. 

International    War,    130;    at 
an  end,  131. 
J 

Japan,  alleged  designs  of, 
111;  and  the  Arnior  Plate 
Press,  166;  taxation  of,  Oi. 

Japanese  fishermen,  112. 

Japanese  friendship  with 
America,  166. 

Japanese  Navy,  91. 


Jews,  and  the  Millennium, 
24;  creators  of  the  Bourse, 
24. 

Johnson,  Alvin  S.,  on  ex- 
penditures, 1 ;  on  rise  of 
cost  of  war,  49;  on  war 
waste,  57. 

Johnson's   Law,   1,  48,  98. 

Jordan,  Jessie  K.,  Preface. 

Jurisdictions  or  Powers, 
140,  141. 


Kamada,  Eikichi,   143. 
Kiderlen-Waechter,  82. 
King  Krupp  of  Essen,  108. 
Kings  as  borrowers,  6. 
Kipling,    Rudyard,     on     the 

Peace  of  Dives,  8. 
Koweit  affair,  138. 
Krehbiel,  Edward  B.,  Preface. 
Krupp,  108. 


La   Argentina,  96. 

Labor  L^nions  opposed  to 
War,  143. 

Lane,  Ralph,  see  Angell, 
Norman. 

Lea,  Homer,  115. 

Leo,  Heinrich,  112, 

Lesser  Nations,  Debts  of,  46. 

lyiberal  Politics,   105. 

Life,  Editor  of,  on  expendi- 
tures,  51. 

Lincoln,  Abraham,  131,  173. 

Lion's  Tail,  twisting  it,  163. 

Lloyd-George,  David,  on  fall 
of  consols,  31. 

Lockyer,  Norman  B.,  171. 

London,  as  tlie  hojiper  of  in- 
competence, 100;  as  the 
world's  clearing  house, 
100. 


208 


INDEX 


Loti,  Pierre,  90. 
Louis  XIV  as  borrower,  5. 
Louisiana   Purchase,   13:3. 
Lowell,  James   Russell,   126. 
Lower  California,  118. 

M 

INIcCIellan,      Alexander      G., 

1J8. 
McCuUagh,      Francis,      102, 

103,   108,   109. 
MacDonald,  James  A.,   140. 
Machiavelli,  on  the  duties  of 

a  Prince,  151.  " 
Magdalena     Bay,    113,    118, 

119,   120,  121,    111;   75,000 

Japanese     troops     located 

there,   117;    six    Japanese 

crab-catchers  found  there, 

119. 
Mahan,  Admiral  E.  T.,  97, 

127. 
Mailed  fist,  165,  146. 
Maine,  The,  156. 
Massachusetts     Commission, 

report  of,  59. 
Massingham,  H.  W.,  136. 
Mendelssohn,  19. 
Mexican  Boundary,  141. 
Mexican   Concessions,   119. 
Mexican  War,  156. 
Militarism   entrenched,    106. 
Militarism  in  Argentina,  96. 
Military  Defences,  169. 
Military  Expenditures      and 

Progress,  1. 
Military  Expenses,   169. 
Military  Expenses  of  World, 

188,  189. 
Military     Pacification,     156, 

67. 
Mirage  of  Map,  61,  73,  134. 
Money  Power,  22. 


Money  trusts  not  discussed, 

Mongolian  Invasion  of  Rus- 
sia, 121. 

Monroe  Doctrine,  96,  97, 165. 

Montcfiore,   19. 

Monterey,  Presidio  of,  110. 

Moral  Grandeur  of  Nations, 
171. 

Morning  Leader  (London), 
103. 

Morocco   Affair,   70,   71,   72. 

Municipal  debt,  26. 

Murray,  Sir  George,  105. 

N 

Napoleon,  hatred  of  debt, 
35;  on  human  life,  147. 

Napoleon  III,  169;  and  Bis- 
marck, 15. 

Nation  (London),  105,  136, 
154;  on  interest  of  high 
finance,  80. 

Nation  (N.  Y.),  on  Persia, 
68. 

National  Academies  not 
criticised,  3. 

National  Council  of  De- 
fense, 167. 

National  Debt,  6. 

National  defense,  173,  178, 
179;  against  enemies  with- 
in, 173,  167. 

National  vice  of  England, 
69. 

Nature,  London,  171. 

Naval  Supremacy  of  Great 
Britain,  104. 

Navr  for  protection,  not  at- 
tack, 144. 

New  Caledonia,  112. 

New  Zealand,  debt  of,  47; 
war  scares  in.  111. 


INDEX 


209 


Nineteenth  Century  a  mo- 
mentous epoch,  4. 

Noda,  O.,  1:20. 

Norway,  ceremonies  at  Ber- 
gen, 91. 

Novicow,   Jacques,   131. 

o 

O'Conner,  T.  P.,  on  Baron 
Hir^^ch,  17;  on  Baron  de 
Forest,  18. 

Octroi,  36. 

Opportunity,  173. 

Orchilla,    119. 

Oriental  Whaling  Company, 
119. 

Ottley,  Sir  Charles,  105. 

Ouest  Railways,  27. 

P 

Pageant  of  the  Ships,  155. 
Parliaments  as  Ijorrowers,  5. 
Passing  of  War,  175,  179. 
Passy,  Frederic,  169. 
Patriotic  loans,  5. 
Patriotic  waste,  155. 
Pawnbroking   and    banking, 

13,  63,  85. 
Pawnbroking,  basis  of  great 

fortunes,  4. 
Pax  Britannica  in  South  Af- 
rica, 156. 
Peace     and     Solvency,     173, 

174. 
Peace    and     the    Professor, 

113. 
Peace    establishments,    125, 

126. 
Peace  of  Dives,  8. 
Peace  of  Impotence,  126. 
Peace     of       Preponderance, 

1-26. 
P^reire,  House  of,  15. 
Perris,  George  II.,  106. 


Persia,  abuses  of,  64,  65,  66; 
crushing  of,  64. 

Philippines,  96. 

Piracy,  abolition  of,  93. 

Pitt  and  the  last  war  check, 
6;  as  borrower,  6. 

Pitt's  last  words,  7. 

Policy  of  Patriotism,  110. 

Portugal,  92. 

I^owder,  expense  of,  110. 

Powell,  E.  A.  on  achieve- 
ments of  pawnbrokers,  20; 
on  burden  of  European 
Debt,  22,  23,  24;  on  Cas- 
sel,  19;  on  Giinzburg,  16; 
on  Hirsch,  17;  on  Impos- 
sibility of  War  without 
money,  80;  on  wealth  of 
Rothschilds,  12. 

Powers  or  Jurisdictions,  140, 
141. 

Privileges,  struggles  against, 
50. 

Professional  Interest  in 
War,  146,  147. 

Prussia,  growth  of  debt  of, 
40. 

Public  Expenses  of  United 
States,  196,  197. 

Public  Opinion  (London), 
S2. 


Queen's  Dauirhtcrs  in  India, 
156. 

R 

Ralli,  19. 

Readjustment  of  Values, 
169. 

Real  rulers  of  Europe,  80. 

Repulilican  Peace  Commit- 
tee, 111. 

Retrenchment,  151,  167. 


210 


INDEX 


Reversed  Situation  in  War, 
174. 

Rich  Man's  War,  the  poor 
man's  fight,  146. 

Riots,  against  taxes,  154; 
due  to  high  taxes,  61;  for 
bread,  154. 

Rosebery,  Lord,  126;  on 
royalty,  83. 

Rothschild,  house  of,  8,  10, 
20;  rules  of  house  of,  12; 
wealth  of  house,  12. 

Rothschild,   Mayer,   10. 

Rothschild,  Nathan,  founder 
of  high  finance,  21 ;  great- 
est of  financiers,   10. 

Russell,  Lord  John,  94. 

Russia,  War  Scares  of,  121. 


Sabotage,  61,  154. 

Salt  of  Death,  112. 

Salt  of  Life,  112. 

Sars,  Michel,  92. 

Sassoon,  House  of,  19. 

Schican  Company,  108. 

School    of    Musketry,    110. 

Schurz,  Carl,  146;  on  need- 
less war,  3. 

Science  and  the  cost  of  war, 
7. 

Science  and  war,  7. 

Scientific  research  and  me- 
chanical   invention,    4. 

Sea  Power,  86;  and  Control 
of  Sea,  92;  and  Poverty, 
99;  and  the  hyena  idea, 
90;  as  a  nightmare  of 
History,  93;  as  Ceremo- 
nial Decoration,  91 ;  as 
Insurance,  89;  as  Nation- 
al defense,  88;  as  peace 
maker,  89;  as  protector  of 
commerce,   89;   in    Imper- 


ialism, 90;  purpose  of,  87. 
Secret  Diplomacy,  126. 
Secret  Treaties,  137. 
Seligman,  Isaac  N.,  85. 
Servitude,     Savagery,      and 

Waste,  107. 
Shadow  of  Conflict,  75. 
Shaw,   Bernard,  on   national 

duty  toward  bank    credi- 
tors, 31. 
Showennan,   Grant,   113;   on 

Armed  Peace  as  sister  of 

war,  54. 
Shuster,  iMorgan,  68. 
Smith,  Goldwin,  on   Pitt,  6. 
Social  Democracy,  146. 
Social  Unrest,  61. 
Socialism,  61. 
Socialist  groups  opposed  to 

war,  145. 
Solidarity     of     Commercial 

World,"  82. 
Spain,  92. 
Spanish  War,  156. 
Spendthrift  Age,  51. 
Si)eyer,  James,  85. 
Spheres  of  Influence,  63,  64. 
Spiked  Helmet,  165, 
Squeezing  of  taxes,  5. 
Stead,  William  T.,  175. 
Stern,  House  of,  16. 
Subservience     of     European 

peoples,  23. 
Sumner,  Charles,  171. 
Sumner,  William  G.,  125. 
Syndicalism,  154. 
Syndicates  for  War,  102. 


Temple,  William,  113. 
Thames  Ironworks  Co.,  108. 
Thoreau,  Henry  David,  173. 
Toyo  Hoge  Kaisha,  119. 
'transition  period,  180. 


INDEX 


211 


Treat,  Payson  J.,  Preface. 
Treaties  open  not  secret,  137. 
Tribune,  N.  Y.,  on  interests 

of  high  finance,  80. 
Tripoli  Afltair,  72,  73. 
Trusts,  50. 
Tsushima,  88. 
Turkey,  loans  to,  72. 

U 

Ueberall,  108. 

Uncle  of  Kings,  10. 

United  States,  debt  of,  41; 
power  of,  157. 

University,  National,  170. 

Unrest,   61. 

Unseen  Empire  of  Civiliza- 
tion, 180. 

Unseen  Empire  of  Debt,  35. 

Unseen  Empire  of  Finance, 
4,  15,  20. 

Usher,  Roland  G.  on  Per- 
sia, 68. 


Valor  of  Ignorance,  115. 
"S'ane,    Francis    P.    Fletcher, 

156. 
Vickers,   Sons   and    Maxim, 

103,    104. 

W 

War,  and  modern  bankin<r, 
83;  as  a  catastrophe,  151; 
as  normal  function,  151 ; 
as  world  sickness,  83; 
buried  by  finance,  181 ; 
war  debt  and  other  dclit, 
25;  war  debt  as  a  bless- 
ing, 56;  expenditures  a  to- 
tal loss,  57;  future  of, 
175;  not  a  mere  heroic 
sport,  3;  slain  by  Science, 


181 ;  source  of  national 
debt,    26. 

War  of  1812,  155. 

War  of  Spoliation,  131. 

War  Scares,  111,  112,  113, 
114,    115,    116,    117,    121. 

Wardrooms  and  war,  146. 

Waste  of  Armament,  54. 

Watchdog  of  the  Treasury, 
153. 

Weale,  B.  L.  Putnam,  113, 
156. 

Wellington  as  borrower,  11. 

Werthheimer,  19. 

Wermuth,    153. 

Westminster  Review,  156. 

White,  Andrew  D.,  on  Bis- 
marck's   demands,    16. 

White,  Horace,  on  Confed- 
erate  debt,   43. 

White    Man's    burden,   91. 

White  Slave  Traffic,  156, 
169. 

William,  Landgrave  of  Hesse 
Cassel,  10. 

Winslow,   Admiral,   181. 

Wirth,  Max,  39,  40. 

World  Wide  Movement,  107. 

Wotherspoon,  Gen.  W.  W., 
168. 

Wyatt,  Harold  F.,  on  God's 
Test  of  War,  75. 

Y 

Yale   Review,  125. 
Yamamoto,   Tatsuo,    153. 
Yang  Ki-tak   of  Korea,  123. 
Young,  Robert,  102. 

Z 
Zangwill,    Israel,    on    Peace 
as      created      by      Jewish 
moneylenders,  24;  on  pass- 
ing of  war,  148,   150. 


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